Mongolia law pending to block Chalco transaction

Mongolia is set to pass a law by June that would prevent foreign state-owned firms from owning certain domestic assets, following an outcry over a bid by Aluminum Corp of China (Chalco; ACH.NYSE, 601600.SH, 2600.HKG) to acquire SouthGobi Resources, Bloomberg reported. Chalco said in April that it would buy Ivanhoe Mines (IVN.NYSE, IVN.NASDAQ, 1878.HKG, IVN.TSE, IVA.ASX), which owns a 58% stake in SouthGobi. The deal is pending legal review in Mongolia. The law, which policymakers say is intended to guarantee no one country dominates the economy, will be applied to the Chalco transaction if passed. China accounts for over 80% of Mongolian trade, mostly in natural resources. Senior Mongolian officials said that the law would not apply to existing operations, but some analysts are concerned about the investment impact. “Investors don’t like it when the rules of the game are changed after the game has started, and changed often at that,” said Dale Choi, chief investment strategist at Frontier Securities.