Aviation stocks staged a collective rebound. As of the latest update, AIR CHINA (00753) rose 5.047% to HKD 4.82; CHINA EAST AIR (00670) increased 3.68% to HKD 3.66; CHINA SOUTH AIR (01055) gained 3.46% to HKD 3.89; CATHAY PAC AIR (00293) advanced 2.92% to HKD 12.34.
The market movement follows recent remarks indicating a potential de-escalation in geopolitical tensions. This has led to a significant drop in international crude oil futures, with settlement prices falling over 5.5% on Wednesday. UBS analysts estimate that a prolonged disruption of oil transport through the Strait of Hormuz could keep Brent crude prices around $100 per barrel in the short term, while a resolution could see prices retreat to the mid-$80s.
Changjiang Securities noted that overseas jet fuel prices have begun to decline first, and it is anticipated that domestic cost pressures will ease substantially by June. In the short term, airline stock prices have been heavily impacted by rising fuel costs due to regional conflicts. Should the blockade of the Strait of Hormuz end, oil price expectations improve, large-scale resumption of flights in the Middle East proceed, and additional flights on China-US routes materialize, profitability expectations for airlines are expected to gradually recover. The preferred picks are the three major Hong Kong-listed airlines and privately-owned A-share airline companies.
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