(Yicai) Feb. 24 -- Shares of China Southern Airlines advanced after the freight logistics subsidiary of the state-owned carrier withdrew its initial public offering application on the Shanghai Stock Exchange.

China Southern [SHA: 600029] rebounded 3.6 percent at CNY5.84 (81 US cents) as of 1.45 p.m. in Shanghai today. In Hong Kong, the company [HKG: 1055] surged 7.7 percent to HKD3.63 (47 US cents). Both stocks have plunged about 25 percent since early December last year when they started their current downward trend.

China Southern Air Logistics decided to terminate its spin-off listing because of "shifting market conditions," aiming to adjust capital operation strategies, the company announced on Feb. 21, without revealing any further details.

China Southern Air Logistics planned to raise CNY6.1 billion (USD838.5 million) through its IPO, with the proceeds expected to be used for cargo aircraft acquisitions and digital upgrades to enhance competitiveness, according to its listing prospectus.

The withdrawal aligns with China's stricter enforcement of rules on spin-off listings, which require parent companies to be profitable for three consecutive years before spinning off their subsidiaries, industry insiders told Yicai. China Southern Airlines reported net losses in the past three years.

Even though China Southern Air Logistics blamed its parent firm's losses on the Covid-19 pandemic, deeming them "temporary and non-recurring," China Southern Airlines said last month that it expects to have logged a net loss of CNY1.3 billion to CNY1.9 billion last year because of sluggish international market recovery, supply chain disruptions inflating aircraft part costs, and the Chinese yuan depreciation.

Meanwhile, the cargo branches of China's two other state-owned carriers China Eastern Airlines and Air China successfully went public years ago. China Eastern Airlines Logistics and Air China Cargo listed in Shanghai in 2021 and in Shenzhen in 2023, respectively.

China Southern Air Logistics is not the only company to have been affected by the stricter regulatory supervision on spin-off listings. Since 2024, at least 24 firms withdrew their spin-off applications on the Chinese mainland stock markets, according to data from Wind Information.

Editor: Futura Costaglione