Tags: Mobius | China | Chalco | shakeout

Mobius Sees Chalco as One Left Standing in China Shakeout

Monday, 29 Jul 2013 02:33 PM

Aluminum Corp. of China Ltd. is one of the few producers of the metal set to benefit from government plans to reduce overcapacity, investor Mark Mobius said today.

“Chalco will be the one left standing,” Mobius, who manages $53 billion as the executive chairman of Templeton Emerging Markets Group, said in an interview in Bangkok today. ‘The government doesn’t want to see this excess capacity in the country.’’

China ordered more than 1,400 companies in 19 industries including aluminum to ease oversupply, according to a July 25 statement from the Ministry of Industry and Information Technology. Smaller aluminum companies in China will “fall by the wayside” as power becomes too expensive and as the government begins to “winnow out” producers, Mobius said.

While China’s biggest aluminum producer will be able to raise the capital it needs, Chalco’s smaller competitors will find it more difficult, Mobius said.

Chalco American depositary receipts fell 2.7 percent to $8.16 at 11:28 a.m. in New York, extending this year’s drop to 31 percent. Its shares dropped 2.7 percent in Hong Kong, the most in three weeks. Units of Franklin Resources Inc., Templeton’s parent company, have a combined stake of about 31 percent in Chalco, according to data compiled by Bloomberg.

Chalco’s coal-powered plants are helping the company become “vertically diversified,” Mobius said.

The company is a “good long-term bet” even though the “price performance has been terrible,” he said.

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