>I know I said to hold BHP for now, but some recent news has made me bullish on it again. It has been reported that the world’s biggest mining group, BHP Billiton, and its Australian mining counterpart Rio Tinto are expected to be on the shopping list of China Investment Corp (CIC). now that the state-owned investment fund has initiated management of the $200 billion in capital it has at its disposal.
CIC aims to invest in about 50 large-sized enterprises around the world. Just a few days beyond its official launch this past Saturday, the state-owned investment arm has already aroused considerable speculation about its acquisition plans. ”We believe it is also certain that the two huge mining companies in Australia–Rio Tinto and BHP Billiton –as well as Companhia Vale do Rio Doce in Brazil, would catch the attention of China Investment Corp.,” Credit Suisse analysts said Thursday in a note to clients.
Credit Suisse predicted CIC would only take a 5-10% stake in each company, remaining a passive investor to avoid political hassles in overseas markets. Mind you a 10% stake is equal to $20 billion, which is also about 10% of BHP market capitalization.
BHP Billiton and Rio Tinto have been hitting record highs during the year as the companies see growing demand for iron ore, copper and nickel in Chinese market. BHP, one of Australia’s biggest oil producers, however saw its shares swoon Thursday after crude oil closed below $80 a barrel. The stock dropped A$1.45, or 3.2%, to A$43.75 in Sydney on Friday. Rio Tinto shares also suffered a setback on the news, losing A$3.69, or 3.4%, to A$106.28. However, they should both go up nicely on this news on Monday.
So I would say, buy BHP below $45 and it is also worth having a look at RIO.
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