China Eastern Airlines Co. Ltd (NYSE:CEA) is the stock of the day when it comes to Chinese ADRs. The stock is the biggest winner of the day by a heafty 8.76% gain or $2.79. In dollar terms only Sohu.com (SOHU) does better today by trading $3.87 higher than yesterday's close.

One obvious reason for strenght within China's aviation industry is falling crude oil pirces. since kerosene makes up well over 50% of all costs for airliners, lower prices mean better margins and profitability. The stock got additional boost from rumors that China Eastern Airline (CEA), China's third largest after China Southern Airline (ZNH) and Air China (0753.HK), is considering a cooperation or a possible merger with her arch rival in Shanghai, Shanghai Airlines (上海航空).

The reasoning for such a merger is very sound. Since Shanghai, China's financial capital, serves as the main hub for both China Eastern Airlines and Shanghai Airlines, a merger of the two would create a momopoly situation in this fast growing market. China Eastern has developed an extensive overseas and domestic route structure which could be well completmented by Shanghai Airline's. 

As the following press release submitted to the Hong Kong Stock Exchange clarifies, China Eastern Airlines is not in negotiations with Shanghai Air in any form and as such recent rumors have no ground.

By looking at the performance of Chinese ADRs today, Chinese refiners continue to do well thank to a dip in oil prices. Asia's largest refiner, Sinopec Corp. (SNP) is trading $1.74 or 1.69% higher vs. last close, a gain that was easy to predict using our Overbought/Oversold indicator. The beauty of such indicator is that it takes into account stock charateristics by using standard price movements for each stock. And as this OBOS indicator predicted this morning before the market open that SNP is about to have a good day. Enjoy the ride!

This announcement is made by China Eastern Airlines Corporation Limited (the “company”) in compliance with Rule 13.09(2) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (which requires any issuer listed on The Stock Exchange of Hong Kong Limited (the “Stock exchange”) whose securities are also listed on other stock exchange(s) to simultaneously inform the Stock Exchange of any information released to any of such other exchange(s) and to ensure that such information is released to the market in Hong Kong at the same time as it is released to the other market(s)).

The Company noted recent press coverage regarding the merger of the Company and Shanghai Airlines (上海航空) (“Shanghai airlines”), quoting a source from the securities department of Eastern Airlines (東方航空) indicating that the rumor about the possible merger between the Company and Shanghai Airlines is true but the deal is still under negotiation. The Company hereby makes the following statement in response to the request of the Shanghai Stock Exchange: After inquiring with China Eastern Air Holding Company, the controlling shareholder of the Company and all the directors and the management of the Company, the Company was informed that, other than the proposed cooperation with Singapore Airlines Limited, which has been discussed,  approved and disclosed by the board of directors of the Company previously, the Company has not engaged in any discussion or negotiation with any other airline companies regarding any proposed merger. In addition, there is no securities department within the Company. The Company will strictly comply with its disclosure obligations in accordance with the relevant procedures for disclosure of information should there be any major development of the Company.

Shanghai Securities News (上海證劵報) is the designated press of the Company for disclosure of information and any information published by the Company in the said press shall prevail. Investors are advised to be cautious and take note of the risk associated with the investment.

By order of the board of directors of China Eastern Airlines Corp. Ltd.

Director and Company Secretary

Li Fenghua (Chairman, Non-executive Director)

Li Jun (Vice Chairman, Non-executive Director)

Cao Jianxiong (President, Executive Director)

Luo Chaogeng (Non-executive Director)

Luo Zhuping (Executive Director)

Hu Honggao (Independent non-executive Director)

Peter Lok (Independent non-executive Director)

Wu Baiwang (Independent non-executive Director)

Zhou Ruijin (Independent non-executive Director)

Xie Rong (Independent non-executive Director)