Shares of China Southern Airlines, the largest airline in China, plummeted by 6.18% on November 11th, as analysts raised concerns over the overvaluation of Chinese airline stocks and an unfavorable demand outlook for the industry.
In a research note, Morningstar equity analyst Cheng Wang stated that Air China, China Eastern Airlines, and China Southern Airlines appear overvalued due to several factors impacting the demand for air travel. The analyst cited declining passenger yields, driven by cautious consumer spending and intense competition from high-speed rail services, as a significant challenge for the airlines.
Additionally, the potential re-election of President Trump could further impact U.S.-China travel, with the analyst warning of potential reductions in business ties and more stringent visa requirements for Chinese travelers. Currency fluctuations, particularly a potential depreciation of the yuan, could also make international travel more expensive for Chinese consumers, further dampening demand.
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