Will Creation of a Megasupplier Generate Mega Returns for Natural Resources? | ETF Trends

Down under in Australia, BHP Billiton (BHP) reported that U.S. Antitrust regulators are granting partial approval for its aggressive takeover of Rio Tinto (RTP), a move that might stoke some exchange traded funds (ETFs).

BHP is the world’s largest mining company, and recently the U.S. Department of Justice and U.S. Federal Trade Commission ended an antitrust waiting period over a proposed deal to buy out Rio Tinto for $170 billion, reports the Associated Press.

The deal would create a megasupplier of iron ore, coal and other natural resources that are in high demand. Clients have expressed some concern that a combined company would have too much control over key resources.

Among the ETFs potentially affected include:

  • Market Vectors Steel (SLX): up 20% year-to-date; Rio is 13.7%
  • iShares MSCI Australia (EWA): down 11.8% year-to-date; Rio is 4.2%; BHP is 15.4%

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.