Chalco to benefit from aluminium capacity cut
Mark Mobius says firm is a good bet amid government plan to reduce overcapacity
Investor Mark Mobius said Aluminum Corp of China is a "good long-term bet" as one of the few producers of the metal set to benefit from the government's plans to reduce overcapacity.
The mainland ordered more than 1,400 firms in 19 industries including aluminium to ease oversupply, according to a July 25 statement from the Ministry of Industry and Information Technology.
While Chalco, China's biggest aluminium maker, would be able to raise the capital it needed as the government began to "winnow out" smaller producers, other companies would "fall by the wayside", Mobius said.
"Chalco will be the one left standing," said Mobius, executive chairman of Templeton Emerging Markets. "The government doesn't want to see this excess capacity in the country."
Chalco's American depositary receipts (ADRs) fell 2.7 per cent to US$8.16 in New York on Monday, extending this year's drop to 31 per cent. The ADRs traded 0.3 per cent below the Hong Kong shares. Each ADR equals 25 underlying shares in the Beijing-based company.
Units of Franklin Resources, Templeton's parent company, have a combined stake of about 31 per cent in Chalco.