Vale Said to Attend Hong Kong Listing Hearing Today

Nov. 25 （Bloomberg） -- Vale SA, the world’s biggest iron ore exporter, is attending a Hong Kong stock exchange hearing today to push its case for a listing of its depository receipts, according to three people familiar with the matter.

Trading may start next month if the Rio de Janeiro-based company passes the hearing, said the people, who declined to be identified before an announcement. It would be the first listing of depositary receipts by an overseas company in Hong Kong.

Vale joins Russia’s United Co. Rusal and Luxembourg-based L’Occitane International SA in seeking access to Chinese investors, and shows Hong Kong exchange’s plan to diversify listings is paying dividends. Asia’s third-biggest stock market handled almost $44 billion in initial public offerings this year.

“Chinese investors would be very interested in Vale after it’s listed in Hong Kong,” said Zhao Rui, a Shenzhen-based analyst at Guotai Junan Securities Co. “Vale is seeking to increase its market share in China as India is cutting exports.”

Vale is seeking closer access to China, the biggest consumer of iron ore, after third-quarter profit more than tripled from a year ago on rising prices and demand from Asia.

JPMorgan Chase & Co., the sole sponsor of the listing, will arrange for some Vale shares listed overseas to be transferred to Hong Kong in the form of receipts, the people said.

Chinese Investors

Scott Sapp, a spokesman for Hong Kong Exchanges & Clearing Ltd. said the bourse doesn’t comment on listing plans of companies. Calls to Vale’s press office in Rio De Janeiro outside normal business hours weren’t answered.

“The idea of listing in Hong Kong was a way to bring an alternative for Chinese investors in Vale,” Jose Carlos Martins, executive director of strategy, said in September in Shanghai.

Shares of the Brazilian company trade at 11.84 times estimated earnings, according to data compiled by Bloomberg. Stocks on Brazil’s Bovespa stock index trade at an average 13.3 times estimated earnings. Stocks on the Hang Seng Index, Hong Kong’s benchmark, have an average price-to-earnings ratio of 14.65 times.

Getting overseas resource producers to list is part of Hong Kong Exchanges’ strategy to broaden offerings away from Chinese companies. Mainland stocks accounted for 46 percent of the HK$20.64 trillion （$2.66 trillion） capitalization of Hong Kong’s Main Board at the end of October, exchange data shows.

Hong Kong introduced a framework for depositary receipts on July 1, 2008. It offers an alternative to foreign companies prohibited from registering shares overseas, according to the exchange’s website.

Iron Ore Gap

Vale fills a “a gap” for investors keen to buy shares of iron ore producers traded in Hong Kong, said Guotai’s Zhao “Vale’s iron ore has more than 50 percent iron content, compared with 20 percent among the listed Chinese producers.”

A successful listing may pave the way for other Brazilian companies to trade in Hong Kong. Petroleo Brasileiro SA, Brazil’s state-controlled oil company, is considering issuing depositary receipts in Hong Kong, the Ming Pao newspaper said Nov. 16, citing an unidentified person.

The Hang Seng Index has rebounded 23 percent since reaching this year’s low on May 25.

--Fox Hu and Helen Yuan. Editors: Tan Hwee Ann, Darren Boey