Brazil's Vale Makes Hong Kong Trading Debut

8 Dec

HONG KONG – Brazilian mining giant Vale made its Hong Kong trading debut Wednesday, the first South American firm to list in the city, as the company raises its exposure to resource-hungry China.

Sao Paulo-based Vale, which has a market capitalisation of about 176 billion US dollars, is already traded in Brazil, New York and Paris and was not raising new money.

However the listing reflects its growing ties with China, which accounted for about 38 percent of Vale's turnover last year.

Vale's common share depositary receipts, which represent shares in the miner, closed slightly down at 265.20 Hong Kong dollars (34.15 US dollars) after opening at 270 Hong Kong dollars on a cautious day for a market anxious about Chinese economic policy. Hong Kong's benchmark Hang Seng index lost about 1.4 percent as traders anticipate a likely interest rate hike.

“Given today's market conditions, Vale is holding up remarkably well,” Francis Lun, general manager of Hong Kong's Fulbright Securities, told AFP.

“The volume is not really that active because it's a bit pricey so it's out of reach for most speculators.”

Vale, the world's second-biggest mining firm, had said it would list about 652 million common shares and class A preferred shares to boost its regional presence.

“Asian investors have a balanced view of China's economy — that will be reflected in our share price,” chief financial officer Guilherme Cavalcanti told a press briefing earlier Wednesday.

The Asian market, including China, accounted for more than half the company's 23.31 billion US dollars in sales last year.

“A secondary listing in Hong Kong is a significant step in raising our profile in, and demonstrating our commitment to, Asia,” Vale said in its listing prospectus.

The firm is looking to Asia as the region spends heavily on infrastructure projects, including building new airports and roads, Cavalcanti told a press briefing Sunday. “This will increase demand a lot for minerals, including iron ore,” he said.

Vale, the world's largest iron ore producer, previously said it would spend 24 billion US dollars starting from next year to finance operations, research and development, and carry out projects.

The firm's fortunes in China are largely tied to the country's booming steel industry, which buys Vale's iron ore for processing.

However Lun warned that “China has a lot of excess steel capacity. If they cut production, then the price (of iron ore) will crash.”

Cavalcanti said on Sunday that Vale had no plans to raise new money in Hong Kong, but added that there was “always a possibility in the future”.

Companies are increasingly looking to Hong Kong as a gateway to the Chinese capital market, with Russian mining giant UC Rusal raising 2.2 billion US dollars in Hong Kong earlier this year. Rusal was the first Russian company to list on Hong Kong's exchange.

In May, cosmetics group L'Occitane became the first French company to list in Hong Kong, after an initial public offering raised 704 million US dollars to fund an aggressive expansion in China, Japan and other emerging markets.

Hong Kong's bourse is on track to lead the world in initial public offerings in 2010, raising about 51.49 billion US dollars as of Thursday, according to figures from Dealogic.

– AFP /ls

Channel News Asia

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