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Shanghai carriers caution investors
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Shares of China Eastern Airlines and Shanghai Airlines hit their fourth consecutive daily limits of 5 percent yesterday after a one-hour trading suspension, indicating the favorable market response to the merger, stock analysts said.

In an apparent effort to cool the market frenzy, the carriers issued statements on Wednesday indicating there was no further information (about the proposed merger) to be disclosed, nor did they have any further plans on asset restructuring, acquisition or share issuance for the next two weeks.

The two Shanghai-based carriers also warned investors on the potential risks in the rising share prices. Shanghai Stock Exchange (SSE) regulations stipulate that share price increases that hit the daily limit for three consecutive days are termed "abnormal" and require company clarification.

Shares of China Eastern jumped to 6.48 yuan while Shanghai Airlines touched 7.20 yuan yesterday in Shanghai. The shares of China Eastern in Hong Kong made a gain of 3.96 percent to HK$2.10 per share.

Li Lei, industrial analyst with CITIC China Securities, said the price surge indicated market confidence and the benefits that the two airlines can derive from the proposed merger. What's more, the price increase of the two airlines is seen as a catching up with the market upsurge during their suspension last month.

"Apparently, the market expects the bright side from the merger, but the sentiment needs support from the strengthened performance after the new China Eastern Airlines completes the assets restructuring, or it cannot last long," said Ji Lijun, analyst, Shanghai Securities.

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