Air China Falls After Share Sale Plan, Market Turmoil

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Air China Ltd. fell 7.4 percent in Hong Kong on Wednesday, as its stock resumed trading a day after China’s largest airline by market value announced plans to raise as much as 12 billion yuan ($1.9 billion) by selling new shares at a discount.

Air China shares also fell 5.6 percent in Shanghai, to 14.50 yuan. Trading had been suspended in both cities since June 29 pending the announcement of the carrier’s fundraising plans. The Shanghai Composite Index fell more than 14 percent during that period, while Hong Kong’s Hang Seng Index fell 6.7 percent.

The Beijing-based airline plans to sell as many as 994 million shares in a private placement for at least 12.07 yuan each, a discount of 21 percent to the Shanghai share price before trading was halted. The shares will be sold to as many as 10 investors, including the airline’s parent, China National Aviation Holding Co.

“The offering price of the share placement is fair,” Ajith Kom, a Singapore-based analyst at UOB Kay Hian, said by telephone. “Shares are falling mainly because the stock has been suspended on the A-share market for almost a month, which leads to some volatility.”

The airline will use the money to buy 15 Boeing Co. 787 planes and install services such as Wi-Fi, Air China said in an exchange filing Tuesday evening.

In a research note, CICC analysts Xiaofeng Shen and Xin Yang wrote that the private placement will have only a limited diluting effect on the shares and will boost the carrier’s medium- to long-term growth.

“As segment leader, Air China will be the biggest beneficiary of the outbound travel boom,” the analysts wrote.

In a separate statement Tuesday night, Air China said it expects net income to rise as much as 743 percent to 4 billion yuan in the first six months of this year compared to a year earlier, based on Chinese accounting standards.

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