HK Stock Market Move | Aviation stocks continue to decline as US-Iran talks stall and oil prices remain high, market attention is focused on the transmission of airline costs.

Aviation stocks continue to decline. As of the time of writing, Air China Limited (00753) fell by 3.01% to HK$4.51; China Eastern Airlines (00670) fell by 2.53% to HK$3.47; China Southern Airlines (01055) fell by 2.37% to HK$3.71; and CATHAY PAC AIR (00293) fell by 1.33% to HK$11.91. On the news front, talks between the US and Iran are not going smoothly, and international oil prices continue to remain high, with Brent crude oil still hovering above $110 per barrel. Earlier, US President Trump issued new threats of war, stating that the US may need to take military action against Iran again and revealing that he came close to approving military strikes with only one hour to spare, but ultimately decided to hold off. US Vice President Pence also remarked that there have been significant developments in US-Iran negotiations and that the US is prepared to restart military actions with a "Plan B." Haitong Cathay Pacific believes that after the May Day holiday, the market has entered the traditional off-season, with high oil prices preventing airlines from lowering fares to stimulate off-season traffic. The bank estimates that domestic passenger traffic last week may have decreased by nearly 10% year-on-year, approaching the low point during the May Day holiday; domestic passenger load factors continue to increase year-on-year, with domestic base ticket prices rising by approximately 7% year-on-year and overall ticket prices including fuel surcharges rising by nearly 20% year-on-year; off-season demand (quantity and price) is still significantly higher year-on-year. The bank expects that supply and demand dynamics and efforts to prevent overcapacity will help oil price transmissions perform better than market concerns, and the sharp increase in ticket prices on routes between China and Europe will provide airlines like Air China with the ability to hedge against rising industry oil prices.