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TheStreet Open House

5 Foreign Stocks That Could Pop This Summer

Aluminum Corp. of China

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Aluminum Corp. of China (ACH), or Chalco, is another foreign resource stock that's getting heavily shorted by investors right now. The $5 billion aluminum producer is the biggest in the People's Republic, positioning that puts Chalco in good shape to service the domestic aluminum market. Chalco is also one of the lowest cost producers in a high production cost region for aluminum, which gives Chalco advantages over its peers at home but puts it at a disadvantage over foreign rivals that boast more bargain-priced production for the same market priced commodity.

In many ways, Chalco's reliance on the domestic market for aluminum in China is a good thing -- it also spares the firm from excessive exposure to Western markets, where aluminum demand is struggling. The Chinese government has been keen to prop up domestic markets for materials in the past, and Chalco's home team status could help the firm be first in line for support.

>>5 Stocks Immune to Europe's Problems

Chalco has also been working to better integrate its operations, adding fabricating plants to its business back in 2008 and 2009. That added capacity could eventually help boost margins that a fabricator would be earning on Chalco's aluminum production. Investors should keep a close eye on the unit's progress toward profitability.

Short-sellers have pushed the short interest ratio in Chalco up to 20.2, making it the most heavily shorted name on this list. At that level, it would take more than a month of buying pressure to cover shorts in ACH given current volume for the stock. Manufacturing data in China is likely to be one of the biggest catalysts for a sentiment change in this stock.

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