Listing in China is an obvious fit for Brazilian mining giant Vale, which ships massive amounts of iron ore to Chinese customers every year. The Hong Kong shares are hot.
So-called HDRs or Hong Kong Depositary Receipts — the Chinese equivalent of ADRs — closed their first trading day at a slight but significant 0.7% premium to their U.S.-traded counterparts, or 1.4% over what they were worth in Vale’s native Brazil.
The new offer in Hong Kong does not raise new funds or dilute other investors elsewhere. Since iron rivals RIO (quote) and BHP (quote) are traded in Australia, they at least do not have the time zone problem.
Meanwhile, VALE continues to talk up its forecasts on copper demand growth, which could lead analysts to start re-rating their stock price targets. Both Deutsche Bank and Barclays have come out with repeat “buy” recommendations on the stock in the last week.
If copper strengthens to $4 a pound over the foreseeable future, VALE looks great. And meanwhile, iron ore inventories remain tight, which should be a high margin driver — wherever the stock trades.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.