Asia's top oil and gas producer PetroChina Co (中石油) became the world's largest company by market value yesterday, overtaking US giant ExxonMobil as its shares surged on their debut in mainland China.
The milestone underlined the ongoing boom on Chinese markets, which have been flooded with ready cash brought by hungry investors who have disregarded warnings that the China bubble is destined to burst eventually.
PetroChina already traded in Hong Kong and New York, but its new shares made their debut yesterday on the Shanghai bourse after the largest initial public offer (IPO) ever in China.
The shares, priced at 16.7 yuan for the offer, were trading at 48.62 yuan (US$6.50) shortly after opening, an increase of 191 percent that put the value of the company far past the US$487 billion capitalization of ExxonMobil.
In terms of earnings, however, PetroChina does not even make it into the top 50 companies in the world, raising a red flag both about the valuation of the firm and the overall sustainability of the Chinese stock boom.
The Chinese bourse surged 130 percent last year and is up around 110 percent 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.
Zhu Zhiyong (
"I think it's a bit risky for individual investors to buy in at the moment because we don't see much growing space," Zhu said.
By midday the price had slipped back to 43.65 yuan -- still up 161 percent.
Wu Feng (吳峰), an analyst at TX Investment Consulting Co (北京天相投資顧問), said a more "reasonable" valuation for PetroChina shares was around 35 yuan.
"Its opening price exceeded our estimates," he said.
Despite the massive surge in PetroChina shares yesterday, the Chinese state will maintain a firm hand in the company, controlling an 86 percent stake.
Regulators have encouraged strong Chinese firms to list on home markets in the hope they can improve the quality of listed companies and deflate prices, looking to cool stock prices this year.
"Through these listings, the intention of the government to try to control the market is quite clear," Guo Feng (
The PetroChina IPO, which raised nearly US$9 billion in its sale of 4 billion shares, is the world's biggest this year and the largest in China's history.
It eclipsed the record of China's top coal company, Shenhua Energy (
Chinese companies are responsible for six of the world's 10 largest initial public offers this year, generating almost US$40 billion.
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