Chalco Falls In Hong Kong After Rio Ends US$19.5 Billion Deal With Parent
June 05 2009 - 2:55AM
Dow Jones News
Aluminum Corp. of China Ltd. (ACH), or Chalco, shares traded in
Hong Kong bucked broad gains in commodities prices to fall by the
midday break Friday, after Rio Tinto Ltd. (RTP) terminated its
planned US$19.5 billion alliance with the Chinese company's
parent.
At the midday break, Chalco was down 1.7% at HK$8.09, outpacing
the benchmark Hang Seng Index's 0.22% fall to 18,463. The stock has
risen 125% since Feb. 1, when the deal was confirmed.
Analysts said the scrapped deal dashed investors' hopes for a
secure supply of raw materials and an injection of aluminum assets
from Aluminum Corp. of China, or Chinalco, which would boost its
share price.
Rio Tinto said Friday morning it will terminate what would have
been China's biggest ever overseas investment amid strong
opposition from investors and Australian politicians.
Instead, the Anglo-Australian miner will pursue a US$15.2
billion rights issue and enter into an iron ore joint venture with
BHP Billiton Ltd. (BHP).
Macquarie Capital Securities analyst Andrew Dale said there is
market talk about asset sales from Chinalco, which had planned to
have strategic holdings in both iron ore and aluminum assets with
Rio Tinto.
"We have always said that while this was a possibility, it was
complicated and asset injections and benefits would take some time
to be realized," Dale said, adding the outlook for Chalco is
relatively poor.
Some analysts were more bullish about the commodity stock after
base metals traded on the London Metal Exchange surged overnight,
with aluminum gaining nearly 6% on the day to a four-week high.
"Still, commodity stocks are expected to be investors' favorites
given growing optimism over global economic recovery, while
commodity prices are also expected to gain support with the U.S.
dollar expected to remain weak in the medium term," First Shanghai
strategist Linus Yip said.
-By Jackie Cheung, Dow Jones Newswires; 852-2802-7002;
jackie.cheung@dowjones.com