HK Stock Market Move | Airlines stocks fall again, high oil prices will continue to suppress capacity expansion in June, institutions point to alleviation in July.

Aviation stocks are once again trending lower. As of the time of writing, China Southern Airlines (01055) is down 4.7% to HK$3.65, China Eastern Airlines (00670) is down 4.4% to HK$3.48, Air China Limited (00753) is down 4.06% to HK$4.49, and CATHAY PAC AIR (00293) is down 1.07% to HK$11.97. On the news front, the domestic flight capacity of airlines listed in May decreased by about 6.2% year-on-year and 2.2% month-on-month in April. Dongxing predicts that the suppression of flight capacity due to high oil prices will continue in June. Although international oil prices have recently fallen, domestic aviation kerosene prices lag behind by about a month, resulting in domestic aviation kerosene factory prices remaining high in June. Therefore, airlines are expected to continue to face high cost pressures in June, but July may see some relief. UBS stated that although Chinese aviation companies have been under pressure in the past few months due to rising oil prices and their stock performance has been weak, the market has largely absorbed the negative factors. With the potential future reduction of fuel surcharges expected to stimulate demand, the bank expects Chinese aviation companies to show consecutive quarterly improvements and a year-on-year improvement in quarterly profits.