Representatives from the Hong Kong Special Administrative Region, Hong Kong Exchanges and Clearing Ltd, and Vale SA attend a listing ceremony for the Brazilian mining company at the Hong Kong Stock Exchange on Wednesday.[Photo/Agencies]

Mining giant seeks to attract Asian investors by increasing regional profile

HONG KONG - Vale SA, the world's biggest exporter of iron ore, debuted on the Hong Kong Stock Exchange on Wednesday, as the Rio de Janeiro-based company seeks to increase its profile in its biggest market.

Vale's common depositary receipts, which represent one share, closed up at HK$265.20 ($34.14) in Hong Kong from 56.72 reais ($33.70) on Tuesday in Sao Paulo. Trading in Hong Kong started at HK$270. The preferred depositary receipts started at HK$236.60 and closed at HK$233.

Vale introduced the receipts, which didn't involve raising any funds, to boost its profile in Asia, which accounts for half its sales.

It is the first time a company has sold depositary receipts in Hong Kong, where a record $45.4 billion has been raised this year in initial public offerings.

"The prospect of benefiting from Hong Kong's high liquidity level is another reason for listing here," said Helen Lau, a Hong Kong-based analyst with UOB-Kay Hian Ltd.

Vale's listing involves 259 million common depositary receipts and as many as 393 million Class-A preferred depositary receipts.

"Fifty percent of our sales are directed to Asia and almost 40 percent to China," said Chief Financial Officer Guilherme Cavalcanti.

The company was also attracted by the "large number of retail investors in Hong Kong as we seek to increase our investor base in Asia", he said.

JPMorgan Chase & Co, sole sponsor of the listing, will arrange for a number of Vale shares to be transferred to Hong Kong.

Vale joins Russia's United Co Rusal and Luxembourg-based L'Occitane International SA in seeking access to Chinese investors.

Hong Kong introduced depositary receipts in 2008 to widen listings to include foreign companies that are prohibited from registering common shares overseas.

Related readings:  Vale sees China steel demand revival by early 2011  Vale hub awaits regulatory nod  Brazil's Vale to list shares on HK exchange  Vale to bump ore prices up in Q3

Shares of the Brazilian company trade at 10.75 times estimated earnings, according to data compiled by Bloomberg.

Stocks on Brazil's Bovespa stock index trade at an average 13.26 times estimated earnings, while shares on the Hang Seng Index, Hong Kong's benchmark, have an average price-to-earnings ratio of 14.72.

A successful listing may pave the way for other Brazilian companies to trade in Hong Kong.

Petroleo Brasileiro SA, the state-run oil company, is considering selling depository receipts in Hong Kong, the Ming Pao newspaper reported Nov 16.

Vale plans to almost double investments to $24 billion next year as it expands iron ore production as well as boosting its nickel, copper and fertilizer businesses, it said on Oct 28.

The company aims to boost minerals and metals production by 16 percent annually between 2011 and 2015, compared with a rate of 9.8 percent from 2003 to 2008.

"We don't expect a slowdown in demand for iron ore," Vale's Cavalcanti said. "Demand for metals and minerals will continue to be high, mainly due to Asia and China."

Demand growth for iron ore may resume at the end of this year after China tackles overcapacity in its steel industry, Vale Executive Director Jose Carlos Martins said in September.

Bloomberg News