Hong Kong Exchanges and Clearing (HKEx) yesterday said it is in initial talks with Basic Element Group, a Russian industrial powerhouse, for listing and hopes to host a first-ever share sale by a non-Asian firm in the coming months.

The listing of Russian industrial giant Basic Element Group in Hong Kong will boost the city's market sentiment, restore confidence and bolster Hong Kong's position as an international financial hub amid the global market upheaval, analysts say.

"Share sale of heavyweight foreign players will help boost market sentiment and restore confidence," said Dick Lee, a corporate finance officer at Phillip Securities. "It also shows Hong Kong's solid position as a preferred fund-raising platform."

Basic Element, owned by Russian billionaire Oleg Deripaska, said the value of its assets almost doubled in 2007, while revenue surged 45 percent.

The company, also known as BazEl, said its assets were worth $45 billion on Dec 31, 2007, with revenue for the 12 months reaching $26.8 billion.

HKEx, which profits from fees paid by investors and listing fees paid by listed companies, saw its second-quarter profits decline 6 percent due to the US slowdown and economic tightening measures on the mainland have impeded its average daily trading value.

Paul Chow, chief executive officer of HKEx, said earlier the second half of 2008 will be "challenging" but the board of directors will adopt various measures to secure profit.

"The Basic Element Group has shown interest in Hong Kong and we have had some very, very preliminary talks with some of its board members about the companies," said Ronald Arculli, chairman of HKEx, Asia's top listed bourse operator.

HKEx expects to announce the listing of a top French personal care product company in a few months, despite an ongoing global market turmoil that has eroded investors' desire for equity.

Arculli, however, didn't reveal the name of the French group.

But sources familiar with the deal said that L'Occitane en Provence had chosen Hong Kong for an initial public offering that might raise about $300 million later this year.

HKEx will also hold off a planned easing of short-selling regulations broached in 2007, Arculli said, adding it will not join other exchanges in slapping emergency curbs on short-selling.

Lee also added that HKEx will hold off the plan because it does not want Hong Kong to lose its image as the world's freest economy. Besides, Hong Kong has very dynamic monetary regulation and short-selling activities are under strict surveillance, he said.

Short selling has been blamed by economists and analysts for the fall of US financial institutions such as investment bank Lehman Brothers.

Reuters contributed to the story

(HK Edition 09/26/2008 page2)