OREANDA-NEWS. January 12, 2015. Chinese commodity producers from Aluminum Corp. of China Ltd. to Yanzhou Coal Mining Co. rallied in New York on optimism the nation’s plan to reform state-owned enterprises will benefit the companies.

Aluminum Corp., known as Chalco, surged 9.6 percent in the steepest gain since October 2011. Yanzhou, the country’s fourth-largest coal company, climbed 4.8 percent, while China Southern Airlines Co. advanced to the highest in 19 months. The Bloomberg China-US Equity Index slipped 0.2 percent as the Standard & Poor’s 500 Index posted its biggest drop since October.

Chalco, China’s biggest producer of the metal, was raised to the equivalent of buy at Macquarie Capital Securities Ltd. while Yanzhou was upgraded to hold. The government’s reform measures and policy support will bolster China’s basic materials sector, Macquarie analysts said in a note dated Jan. 2. Authorities may unveil steps to reform state-owned enterprises before the start of the Lunar New Year in February and allow pension funds to invest in those companies, the China Securities Journal reported last week.

“You can see the market does tend to get very excited and you’ve seen the performance of some of these companies when you do get SOE reform,” John-Paul Smith, founder of Eclectic Strategy, a London-based research firm, said by phone. “The other thing the market would probably like to see is some indication they are actually prepared to embark on a serious industrial restructuring.”

Reform Plans

Though previous reform efforts have reduced the state-owned sector, it still accounts for roughly 30 percent of China’s gross domestic product and more than 40 percent of industrial output, according to the World Bank. China’s reform plan is designed mainly to attract capital, preferably from foreign investors, without giving up the government’s majority control in state companies, Smith said.

Beijing-based Chalco’s American depositary receipts surged to USD12.44, the highest close since January 2013. Trading volume was more than three times the 90-day average compiled by Bloomberg.

Macquarie analysts led by Hefei Deng lifted their recommendations on Chalco from sell and raised the price estimate for its Hong Kong stock by 59 percent to HKD4.30 (55 cents). The company could turn profitable this year amid lower electric power costs and the sale of inefficient assets, they wrote. Chalco said last month it plans to sell four silicon units in Ningxia province through public tenders. Its ADRs have since rallied 16 percent.