More Chinese whispers around BHP Billiton and Rio Tinto and its getting tiresome.
It’s about time ASIC and ASX woke up, got out the big stick and gave someone a belt because by my count this is Chinese rumour number 8, 9 or 10 since the bid was launched last November.
All it does is encourage the stampede into BHP and Rio Tinto, and you’d have to ask if the market was fully informed.
Shares in mining giant BHP Billiton hit an all time high on the Australian stock exchange yesterday on talk that a Chinese entity was seeking a stake in the group.
Usually the rumours start in China through ‘tips’ to eager-to-report Australian journalists (at least two reports on the front page of leading papers had Chinese companies and Government groups on the verge of buying BHP or Rio shares or ‘doing’ something).
Or the story is spread late in the day from London by urgers and others there trying to sell a line of stock perhaps, or taking a position for a hedge fund. London is a source for what people ‘close’ to BHP or Rio say the companies are going to do/say/reveal soon.
So yesterday BHP shares hit an all time high of $48.90 before dropping back to close at $48.56, a 6% rise on the day.
Rio Tinto jumped 7% to a record $153.97 before closing at $151.10, up 6.6%.
That made it a good day for the hedge funds and other traders with over a $1 billion worth of both shares traded. The brokers would have been appreciative of the extra revenue.
Brokers said there were reports of an unknown Chinese entity preparing to grab a stake.
The justification was that as China’s Chinalco had already grabbed a stake in the London-listed shares of Rio, it was sort of natural for something similar to happen in BHP. A broker claimed another rumour had US investment bank, Morgan Stanley buying BHP shares for the Chinese Government.
State-owned aluminium group Chinalco and its best friend, Alcoa of the US, built a 9.0% stake in the combined London and Australia-listed Rio Tinto.
BHP’s 3.4 share bid valued Rio at $165.10, based on the BHP closing price. So according to the hard heads in the market, the BHP offer has no chance of winning at the current ratio.
There was a spate of early interest after BHP chief executive Marius Kloppers didn’t rule out adding cash to the offer in a TV interview in New York, but that was quickly replaced by the unknown China buyer looming rumour.
Mr Kloppers said on an interview on CNBC in the US that "we can’t rule out anything” when asked if he would add cash to his hostile $US178 billion ($190 billion) bid for Rio. In February, he said his offer of 3.4 shares for every one of Rio’s was "the first offer and the only offer”.
Last week, BHP Billiton chief executive Marius Kloppers said he had "no doubt” that Chinese interests would one day would "show up on our register”.
The market was awash with rumours last month after an unsourced media report said that Chinese interests were preparing to pay more than $US20 billion ($21.3 billion) to take more than a 10% stake in BHP Billiton.
If a Chinese group wants to buy BHP shares, doing it in London would be easier: in Australia would involve political risks and considerations that the Chinese Government might not to want to confront at the moment.
It would involve confronting the Federal Government, which could end in defeat.
