US firm sells entire 7pc stake in latest sign of foreign investors eyeing exit door Shares of Aluminum Corp of China (Chalco), the nation's largest aluminium producer, slumped yesterday after United States-based strategic investor Alcoa sold its entire holding in the company, giving the latest sign foreigners are eyeing the exit door from their mainland investments. Alcoa joins US billionaire Warren Buffett in selling down holdings in the nation's biggest companies. Mr Buffet sold about HK$1.1 billion of his stake in PetroChina, the mainland's largest oil producer. On August 29, his Berkshire Hathaway sold 92.66 million PetroChina shares at an average of HK$11.473 per share, reducing its stake to 9.72 per cent. International investors have poured billions of dollars into mainland stocks, lured by earnings potential in the world's fastest-growing major economy. Some are now seeking to cash out, judging the shares are fully valued. Chalco's H shares dropped as much 12.25 per cent after Alcoa sold its stake of 882 million shares at HK$17.34 each on Wednesday for about US$1.96 billion. The sale by Alcoa, the world's second-largest aluminium maker, is equal to about 7 per cent of Chalco's total stock capital. Alcoa bought into Chalco at its 2001 initial public offering and has benefited from a 15-fold increase in its share value. Zhang Qing, Chalco's investor relations manager, said the Alcoa sale was mainly a profit-taking exercise. However, she conceded that co-operation between the two firms on setting up a 50-50 joint venture in Guangxi province had made no material progress after six years. Mainland industrial growth has fuelled a boom in metal prices, including alumina, over the past few years. That bull run may be ending amid concerns the US credit crunch might stall global economic growth. Chalco reduced its alumina spot price 10.26 per cent to 3,500 yuan a tonne, effective from yesterday, to match international levels. Zhang Feng, an analyst at JPMorgan, said the sale surprised him and was a setback in terms of the strategic relationship between the two aluminium giants. Chalco's H shares, which have gained 47 per cent in the past month, closed the session at HK$18.66 yesterday, down 8.53 per cent. Its A shares in Shanghai fell 0.59 per cent, settling at 48.83 yuan. Chalco's H shares are trading at 20 times 2008 earnings, nearly twice that of Alcoa's 10.3 times. Taking profit High valuation may be the reason behind recent disposals of large stakes Chalco's share value increase since Alcoa bought at its listing, in multiples, 15
