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Chalco Will Be One Left Standing in China Shakeout, Mobius Says

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 shares dropped 2.7 percent today in Hong Kong, the most in three weeks and extending this year’s retreat to 28 percent. Units of Franklin Resources Inc. (BEN), Templeton’s parent company, have a combined stake of about 31 percent in Chalco, according to data compiled by Bloomberg.

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

To contact the reporters on this story: Lyubov Pronina in London at lpronina@bloomberg.net; Tony Jordan in Bangkok at tjordan3@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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