The state-owned oil and natural gas behemoth PetroChina is expected to surpass US energy giant Exxon Mobil as the world’s most valued company. This comes at a time as PetroChina is making its debut on the Shanghai Stock Exchange. The Chinese company’s shares are already being traded in New York and Hong Kong and are expected to be seized on by a market awash with cash and investors eager for new opportunities. At the close of markets on November 2, PetroChina was valued at $460 billion, making it the world’s second-most-valuable company, just $26 billion short of Exxon Mobil’s market value.
China already has the biggest bank, insurance company, telecommunications carrier and airline by market value and it is just a matter of days before the largest petroleum giant will also be a Chinese company. Despite being valued so highly in the markets, PetroChina’s profits are not even half as Exxon Mobil.
In the first half of 2007, PetroChina’s net income was $10.9 billion, compared with $19.5 billion for Exxon. It is only China’s economy which is continuing to grow at double-digit rates attracting a large and growing number of investors that it’s share markets are thriving.
While times are good, PetroChina and a string of other state-controlled companies are cashing in on the euphoria with so-called A-share mainland listings. The oil and gas company raised 66.8 billion yuan, or $8.9 billion, before its listing Monday by selling four billion shares at 16.70 yuan a share, the largest amount ever raised in a mainland initial offering.
But, only 13 percent of the company has been floated. The rest is in the hands of its state-owned parent, China National Petroleum.
Analysts forecast that the shares will trade from 30 yuan to 50 yuan, or $4 to $6.70, on its first day, enough for PetroChina to achieve the largest market value in the world. That compares with the Friday closing price of its Hong Kong-listed H share of 19.60 Hong Kong dollars, or $2.53.
Mainland shares typically trade at a big discount in Hong Kong compared with their mainland prices. Weighed down by government-imposed price caps on gasoline, PetroChina’s refinery business is losing tens of millions of dollars a day, according to petroleum analysts.
John Vautrain, senior vice president of the energy economics consultancy Purvin & Gertz in Singapore said,
They are not of the strength of Exxon Mobil. They are very strong in China, and that is good if you make money, but China is not a good place to be a refiner at the moment. They are deeply under water, losing a lot of money in refining.
The fine details of balance sheets and comparative values of shares elsewhere in the world have done nothing to dampen the high spirits of Chinese investors. After decades where low-interest-rate-bearing accounts in state-owned banks were virtually the only outlet for savings, the soaring stock market has become irresistible to a new generation of Chinese. All these savings are now coming out in a flood, with investors hoping to make a fast buck in the stock market.
It is interesting to note that how Chinese, often considered a sjudicious investors are pouring money into the stock market. A trend which is disapproved by most investment analysts who feel that word of mouth and family and friends opinions are influencing investors to dig out their savings and pouring them into the stock market.
Li Hongtao, a futures analyst in Beijing with Zhejiang Yongan Futures, and an active investor said,
There is an accumulated desire to invest. People are heavily influenced by their families, friends and colleagues at work. A lot of them don’t have any knowledge of the market or any idea of the risk,
Earlier this year, state media reported that the number of share trading accounts had exceeded 100 million. In Wenzhou, one of China’s wealthiest cities, the city government this year banned public officials from conducting transactions at work or leaving the office to trade stocks, the state-run Legal Daily reported. Officials caught neglecting their duties would be punished, the report said.
As China’s economic boom continues to lift living standards, the stock market is contributing to a widespread sense of well-being for many investors. This is fed by blanket coverage in the media with newspapers, magazines and business Web sites carrying prominent stories about stock market winners.
Some economists say, a major retreat would have a limited impact on the health of China’s overall economy. Others warn that a sharp decline that hurts business and investors could be the catalyst for a financial crisis, with a fresh wave of bad loans undermining the balance sheets of China’s fragile, state-controlled banks.
In a report on the Chinese economy earlier this year, the World Bank said that China’s banks appeared to have limited exposure to the stock market, although the report acknowledged there was insufficient data to make an accurate assessment.
The only advise for any investor is to think and study the trend before investing in any company, even if it is PetroChina. Otherwise the painfully saved up money would just not remain with them.
Source: International Herald Tribune
