UPDATE:Chalco Ends Down In Hong Kong After Rio Scraps Chinalco Deal
June 05 2009 - 6:03AM
Dow Jones News
The Hong Kong-traded shares of Aluminum Corp. of China Ltd.
(ACH), or Chalco, bucked broad gains in commodities prices to close
lower Friday, after Rio Tinto Ltd. (RTP) scrapped its planned
US$19.5 billion alliance with the Chinese company's parent.
Chalco ended 2.07% lower at HK$8.06, despite a 0.96% gain in the
benchmark Hang Seng Index and sharply higher base metals prices on
the London Metal Exchange overnight, with aluminum gaining nearly
6% on the day to hit a four-week high.
The Chinese company's stock has risen 125% since Feb. 1, when
the planned deal between Rio Tinto and Aluminum Corp. of China, or
Chinalco, was confirmed.
Macquarie Capital Securities analyst Andrew Dale said the
scrapping of the deal dashed investors' hopes of Chalco gaining a
secure supply of raw materials and an injection of more aluminum
assets from Chinalco, which would have boosted its share price
further.
Rio Tinto said Friday that improving market conditions were
behind the decision to terminate the deal, which would have been
China's biggest ever overseas investment.
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..
Citigroup maintained its sell recommendation on Chalco, saying
investors' sentiment toward the stock could be negatively affected
by the development, even though the fundamentals of the company's
operations remain basically unchanged.
"In the past the Rio-Chinalco deal has been one of the key
positives for sentiment and one of the major concerns for short
sellers," Citigroup analyst Catherine Wang wrote. Chinalco Vice
President Lu Youqing said earlier Friday the company hasn't begun
to consider Rio Tinto's rights issue yet, but it is looking into it
and will decide soon.
Analysts said, however, they expect the Chinese company to
participate, because it already owns around 9% of the Rio Tinto
group.
-By Jackie Cheung, Dow Jones Newswires; 852-2802-7002;
jackie.cheung@dowjones.com