was sharply lower in Hong Kong on profit-taking after it signed a final agreement
24 pct stake in the group.
Dealers said its sharp fall came amid a general market downtrend in the Hong Kong and China stock markets after the mainland's central bank raised further the reserve requirements of mainland banks.
They said selling pressures on CEA were also triggered by profit-taking after a surge in its share price since June and on fears that its earnings will be hit severely as crude and aviation fuel prices remain at high levels.
At 12.05 pm, CEA was down 1.55 hkd or 20.16 pct at 6.14, off a low of 6.0 and high of 6.94.
The Hang Seng Index was down 1,175.02 points or 4.08 pct at 27,608.39.
"Despite signing the deal with SIA and Temasek, it won't help CEA overcome in the short-term its problems with rising aviation fuel and its adverse impact on its earnings," said Eva Yip, an analyst at Sun Hung Kai Financial Group.
"Its finances are weakest among the three China airlines and it is only about 10 pct hedged on its aviation fuel costs which puts it in a very vulnerable position as oil prices remain at very high levels," she said.
She noted that CEA's share price soared about 150 pct to a peak of 10 hkd in September from about 4 hkd in June following news of its deal with SIA and Temasek.
"Its share price has surged since June and its sharp fall today is due in part to profit-taking," Yip said.
"Since September, CEA's share price has been sustained at a fairly high level by off-and-on speculation about (the) restructuring of China's aviation industry," she said.
"With no fresh news about any industry restructuring occurring anytime soon, share prices of CEA and other mainland airlines fell in line with the general market," Yip added.
Fears of falls in mainland airlines' earnings this year came after Beijing recently raised the prices of all refined oil products, including jet fuel by 500 yuan a ton, to reduce losses at the mainland's oil refiners. The price increase took effect on Nov 1.
Following the price increase, Morgan Stanley said in a research note that it expects CEA's net profit in 2008 to fall by 33 pct to 381 mln yuan.
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