Shares of Aluminum Corp of China plunged on Monday, closing down 8.8% at HK$9.42 after Goldman Sachs lowered its rating on the stock from Neutral to Sell.
The investment bank also reduced its price target for the company to HK$7.50 from HK$12.50. Goldman pointed to evidence of growing aluminum supply sources both within China and globally, saying that a softer price outlook for the light metal would weigh on the company.
Investor flows and recent ownership data
Pressure on the stock intensified after data published on June 12 showed that Aluminum Corp of China recorded one of the largest single-day decreases in Hong Kong Stock Connect ownership among listed companies. That disclosure indicated that both mainland and international investors have been actively unloading the shares. The selling carried into Monday’s trading session, leaving the stock trading roughly 39% below its 52-week high of HK$15.55.
Commodities backdrop
Aluminum futures have also softened since early June, sliding from a multi-year high near $3,790 per tonne reached in early June to roughly $3,543 per tonne by mid-June - a drop of over 3% within the month. Market participants cited a firmer U.S. dollar as a headwind for dollar-priced commodities after strong U.S. labor market data.
What happened today
On Monday the combination of a major broker downgrade, a lower price target and continued investor withdrawals on Hong Kong Stock Connect contributed to a sharp decline in Chalco shares. The retreat in aluminum futures added an additional layer of pressure on the stock, as weaker commodity prices create a more challenging revenue and margin outlook for producers.
The market reaction left the company’s shares significantly below last year’s high, while the outlook for near-term aluminum prices appears softer according to the brokerage note cited by market participants.
Context limitations
The information in this article is based on the data and statements referenced above. Where data are limited, those limitations are reflected rather than expanded upon.