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Asian shares rise, but bigger falls expected today. Malaysia Airlines "fully valued", Qantas "hold"

Malaysia Airlines CEO, Idris Jala
Malaysia Airlines CEO, Idris Jala
  • Indian and Chinese airlines shares stronger on 14-Jan-08 after losing streak this year;
  • Virgin Blue falls 5.3%, but Qantas up 0.8%, though tough times ahead for both - ABN AMRO;
  • Malaysia Airlines shares drop on cool response by investors to domestic fuel surcharge cancellation.

Asian stock markets snapped their losing streaks yesterday with some small gains. India's airlines did well, with Jet Airways (+7.1%), SpiceJet (+6.1%) and Kingfisher (+5.8%), making up some ground after days of heavy selling. China's airlines were also stronger.

Virgin Blue gave up 5.3%, after a strong rally in the past couple of weeks, while Malaysia Airlines (MAS) fell 3.6% as its move to drop domestic fuel surcharges met with a cool response from investors. HWANGDBS Vickers maintains its "fully valued" on MAS with a RM2 price target, while OSK Research reiterates a "neutral" rating with a RM3 price target. OSK Research stated MAS may continue to be on investors' radar screens, "given its impressive management track record and the swirling rumours which surfaced last month of a potential strategic alliance with Qantas".

Qantas shares rose 0.8% yesterday. ABN AMRO reiterated its "Hold" rating on the stock, updating its forecasts to include a lower oil price, but factoring in further capacity and yield reductions in the face of a tough second half. ABN AMRO forecasts a 1H09 profit of AUD222 million and prefers Qantas to Virgin Blue (Sell, AUD0.25 target price). The broker added, "the entry of Delta and V Australia on the trans-Pacific route should be challenging", and it has factored in yield declines as a result.

Overnight, US and European stock markets slumped by 3-5%, which could lead to some pressure on equity markets in Asia today.

Asia Pacific selected airlines daily share price movements (% change): 14-Jan-09

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