About PetroChina..

Nov 6, 2007

PetroChina is world's first trillion-dollar company

SHANGHAI - PETROCHINA yesterday became the world's first trillion- dollar company in market value after its shares debuted on the Shanghai Stock Exchange.

When shares of the Chinese state-owned oil and gas behemoth touched a high of 48.62 yuan (S$9.46) during intra-day trading, its market capitalisation shot past the US$1.1 trillion (S$1.6 trillion) mark to overtake ExxonMobil as world's most valuable company.

Already traded in Hong Kong and New York, shares of Asia's top oil company were seized on by a mainland market awash with cash and investors eager for new opportunities.

'This is the representation of a booming Chinese economy making its companies stand out,' CIMB-GK economist Song Seng Wun told The Straits Times. 'The large Chinese companies are becoming even larger. Companies such as PetroChina are continuously toughened by the government to seize strategic resource supplies to keep the economic engine humming.'

PetroChina shares, priced at 16.7 yuan for the initial public offer, closed at 43.96 yuan, an increase of 163 per cent that valued the firm at roughly US$500 billion more than ExxonMobil.
The huge valuation underlines the scale of the asset bubble that has been building as Chinese investors have dived into the share markets of Shanghai and Shenzhen, unleashing the huge savings in personal bank accounts.

China is now home to the world's most expensive companies. It has the biggest bank, insurance company, telecom carrier and airline by market capitalisation. By that measure, it has five of the world's 10 largest companies.

In terms of earnings, however, PetroChina does not even make it into the top 50 companies of the world, raising a red flag about both the valuation of the firm and the overall sustainability of the Chinese stock boom. In the first half of this year, PetroChina's net income was US$10.9 billion, compared to US$19.5 billion at ExxonMobil.

The Chinese bourse surged 130 per cent last year and is up around 110 per cent so far this year. Many companies are trading up to 60 times earnings, much higher than many shares on other international bourses.

New stock issues on China's bourses have a long tradition of posting high gains on their debut, but the gains are often speculative rather than a reflection of the firm's intrinsic worth.
PetroChina raised 66.8 billion yuan, or US$8.9 billion, by selling four billion shares, the largest amount ever raised in a mainland initial offer. With only 13 per cent of the company floated, the state will maintain a firm hand in the company, controlling an 86 per cent stake through parent China National Petroleum Corporation.

INTERNATIONAL HERALD TRIBUNE, AGENCE FRANCE-PRESSE