Chalco rises to 10-mth high on Alcoa takeover talk
HONG KONG (Reuters) - Shares in Aluminum Corp. of China Ltd. (2600.HK) (Chalco), the world's second-largest alumina producer, surged more than 6 percent on Wednesday on hopes that a possible takeover deal on aluminum maker Alcoa Inc. (AA.N) could boost the valuation of firms among the sector.
Chalco shares jumped as high as 6.8 percent to a 10-month high of HK$8.57, before easing slightly to stand 5 percent higher at HK$8.45 at noon.
But some analysts said the rally was a bit overdone as the Alcoa news would have no direct impact on Chalco, which is unlikely to be a takeover target.
"We have a 'trading sell' rating for the stock with a target price at HK$7.5," said Patrick Pong, an analyst at South China Research.
The Times of London said on Tuesday multinational miners BHP Billiton (BHP.AX)(BLT.L) and Rio Tinto Ltd. (RIO.AX)(RIO.L) had drawn up separate plans for a US$40 billion acquisition of Alcoa. But BHP Billiton is not currently working on a bid for Alcoa, a source close to the matter told Reuters. For details, see ID:nN12438232
Chalco is the top aluminum maker in China and mergers and acquisitions news triggered investor interest in the sector, brokers said.
The Times report comes just days after India's top aluminum producer, Hindalco Industries Ltd. (HALC.BO), agreed to acquire Novelis Inc. NVL.TO NVL.N in an all-cash deal that values the Canadian company at US$3.5 billion.
Pong said alumina supply should be higher than demand this year and the overall international alumina prices were likely to be easier in 2007 despite a recovery earlier this year.
