PetroChina equals Indian economy

[Bushroda]

PetroChina equals Indian economy
Venkatesan Vembu
Tuesday, 06 November , 2007, 09:20

Imagine a single Chinese company with a market value that's about the size of India's $1 trillion economy. That mind-boggling prospect became a reality on Monday when PetroChina, China's state-owned oil and gas giant, became the world's first company to exceed $1 trillion in market capitalisation following its dazzling debut on Shanghai's manic stock market.

On a day when global crude oil prices edged closer to $100 a barrel, PetroChina's share price in Shanghai peaked at 48.62 yuan (about $6.5) in a frenzy of buying by China's high-on-adrenaline and low-on-reason stock market investors.

At that price, the company was valued at $1.2 trillion, more than twice as much as the next biggest - US energy behemoth Exxon-Mobil, with a market cap of $490 billion.

To put that humongous figure in perspective, the market cap of the entire Indian stock market is about $1.6 trillion; and India's most valuable company - Reliance Industries, which is no pushover either - is worth about $100 billion, which seems puny in comparison.

At close of trading on Monday, as the broader stock market fell in Shanghai, PetroChina closed at 43.96 yuan, still some 160 per cent higher than the IPO price of 16.7 yuan.

The closing price discounts PetroChina's 2007 earnings per share about 50 times - a measure of the excessive froth and overinflated valuations in China's bubbly stock market. Indicatively, PetroChina does not make into the list of world's top 50 companies by profits.

PetroChina chairman Jiang Jiemin, who sounded a gong and raised a toast to open the market, said he felt "very excited… and also a very strong sense of responsibility. This is PetroChina returning to our investors and society."

With its spectacular performance on its home debut, PetroChina virtually single-handedly elevated China to the third place in the global ranking, based on market cap, displacing the UK.

Mainland China's stock market, which has tripled in the past two years, is valued at $4.5 trillion, within striking distance of Japan ($4.8 trillion), but still a long way behind the US ($18.3 trillion). On the market-cap measure, China is now home to five of the world's 10 biggest companies.

Curiously, investors in Hong Kong and New York, where PetroChina's shares are already listed, didn't join the Shanghai party. The company's Hong Kong-listed H-shares fell nearly 7 per cent, to close at a substantial discount to the Shanghai-listed A-share. That indicates that the stratospheric stock market valuations in mainland China are causing international investors more than a little disquiet.

Regulators in China, too, have been trying to rein in the runaway stock market with stern warnings and policy initiatives, but so far they have proved spectacular ineffective. On Monday, the official China Daily quoted Premier Wen Jiabao as saying the Chinese government would "take measures to prevent asset bubbles and avoid huge fluctuations in the stock market." Twice in the past month, the chairman of the China Securities Regulatory Commission has warned investors to be aware of the risks in the market.

But with China's economy continuing to register blistering double-digit growth rates, investors have been deaf to the grim warnings of an imminent stock market crash. PetroChina's mindboggling debut is only the latest indication of that.

 

[Sena Lee]

This is truely an amazing achievement. I was shocked when I first found out.

 

[Devendra9]

India is new in this field while china was there from long time. India too knows to shock the world. We just have to wait and watch what india can do. We our turtle. (slow but surely winner in the end). It dont matter after 20years or 50years. We the future superpower.

 

[Bull]

India is new in this field while china was there from long time. India too knows to shock the world. We just have to wait and watch what india can do. We our turtle. (slow but surely winner in the end). It dont matter after 20years or 50years. We the future superpower.

Thats a bullshit assement. Petrochina's valuation has nothing to do with what you say.

There is a huge mismatch in pricing of petro china, which exists because of the way Chineese stock markets are regulated. The valuation is based on the clsing price of Shanghai price, at HK and NY prices the value of PC is much lower.

 

[Contrarian]

India is new in this field while china was there from long time. India too knows to shock the world. We just have to wait and watch what india can do. We our turtle. (slow but surely winner in the end). It dont matter after 20years or 50years. We the future superpower.

Dont put crap like that here, contribute to the thread intellectually or simply dont post.

 

[gpit]

It may/may not worthy a new thread, but is definitely interesting to put it here.

Bloomberg.com: Asia

Alibaba Shares Triple in Hong Kong Trading Debut (Update7)

By Mark Lee and John Liu

Nov. 6 (Bloomberg) -- Alibaba.com Ltd., operator of China's largest online trading site for companies, almost tripled on its first day after an initial public offering in Hong Kong, making the stock four times more expensive than Google Inc. relative to earnings.

The Chinese company's shares closed at HK$39.50 from their HK$13.50 offer price. That gives Hangzhou-based Alibaba a market value of $25.7 billion, closing in on Yahoo Japan Corp. as Asia's biggest Internet company.

The stock trades at 155 times next year's estimated earnings, underscoring the surge in demand for Chinese shares that made PetroChina Co. the world's first $1 trillion company yesterday. Alibaba, founded nine years ago by a former English teacher with $60,000, predicts profit will almost triple this year on rising online trades in the world's fastest-growing major economy.

``It's a high valuation but if Alibaba can use its leadership position in the e-commerce market to get more Chinese businesses to pay for its services, it will justify it,'' said Rafe Xu, an analyst at Sinopac Securities Asia Ltd. in Shanghai, who plans to initiate coverage on the company. ``They have a lot of work to do.''

Investors got a chance to buy Alibaba shares in last month's $1.5 billion IPO, the biggest by an Internet company since Google's $1.9 billion IPO in 2004. Deutsche Bank AG, Goldman Sachs Group Inc. and Morgan Stanley arranged the Chinese company's sale, which led Hong Kong individuals to order about 257 times the amount of stock available to them.

`Reasonable Pricing'

``The performance of the shares today shows our pricing was reasonable,'' Alibaba Chairman Jack Ma told reporters in Hong Kong today.

Mountain View, California-based Google's stock has jumped more than eightfold since its IPO and now trades at 35 times estimated earnings, according to data compiled by Bloomberg. Yahoo Japan, which operates the nation's most visited web site, trades at 36 times projected profit.

Alibaba also trades at higher multiples, relative to earnings, than other Chinese Internet companies including Tencent Holdings Ltd. and Beijing-based Baidu.com Inc., according to Bloomberg data.

Profit will nearly triple to 622 million yuan this year, Alibaba said in its listing prospectus. Goldman Sachs estimates earnings before stock-based compensation will be 1.24 billion yuan ($166 million) in 2008, according to a report. Including those costs, profit is estimated at 1.02 billion yuan.

``The fundamentals are still in favor of it,'' said Louis Wong, who manages $40 million at Phillip Securities Ltd. in Hong Kong. ``With China opening up, people will see there are a lot of growth prospects.''

Trading Delays

About 536 million Alibaba shares traded today, forcing Hong Kong brokers to face delays in completing buy and sell orders.

``Orders were just stuck in the system waiting for execution,'' said Andrew Sullivan, head of Asian sales trading at Daiwa Securities SMBC Co. in Hong Kong. ``You're only talking about delays of about 10 to 15 seconds, but when something's trading and moving quickly like Alibaba, it makes a difference for the client.''

Alibaba's IPO contributed to an increased in demand from overseas investors, which pressured the Hong Kong dollar to appreciate and prompted the city's monetary authority to sell HK$7.83 billion ($1 billion) on Oct. 31 to defend the currency's peg to the U.S. dollar.

Market Leader

In the quarter ended June 30, Alibaba accounted for 43 percent of total transactions in the so-called business-to- business e-commerce market in China, more than triple its nearest rival, Global Sources Ltd., according to estimates by Analysys International.

Clients can advertise or buy products using Alibaba's Web site for free. The company charges suppliers from China and Hong Kong an annual fee to become so-called premium members, which enables them to gain preferential access to buyers.

The company's joint venture in Japan with Softbank Corp., the country's third-biggest mobile-phone carrier, may start operations ``in a couple of months,'' Chief Executive Officer David Wei said in an interview today. Yahoo! Inc. is helping the company to get access to U.S. users, he said.

China was home to 162 million Internet users at the end of June, second only to the U.S., according to the government-backed China Network Information Center. The nation may surpass the U.S. next year, according to Liu Bin, an Internet analyst at Beijing- based research firm BDA China Ltd.

``The market size is huge,'' Wei said. There are more than 42 million small and medium-sized businesses in China, all potential clients, he said.

Yahoo shares fell as much as 5.1 percent today, dropping $1.26 to $30.10 at 9:59 a.m. in Nasdaq Stock Market trading after slipping as low as $29.76.

Standard & Poor's analyst Scott Kessler in New York said the shares are too pricey after ``excitement'' about Alibaba's IPO propelled the stock as high as $34.08 last month. He reiterated that investors should sell the shares.

To contact the reporters on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net ; John Liu in Shanghai at jliu42@bloomberg.net .

Last Updated: November 6, 2007 10:29 EST

----------
PS. Mr. Ma was a teacher in Hangzhou Normal College. (Hangzhou is the capital of Zhejiang Province, PRC.) His idea of building an internet platform was cordialy supported by the government, yet with a lot of ups and downs business-wise...

 

[Sena Lee]

Interesting post, thanks.

 

[MIG_ACE]

India is new in this field while china was there from long time. India too knows to shock the world. We just have to wait and watch what india can do. We our turtle. (slow but surely winner in the end). It dont matter after 20years or 50years. We the future superpower.

Grow up please! Turtle's don't win in todays world BTW. They end up eating dirt. I'd rather not be the turtle.India must get its act together and usher in the next generation of economic reforms. Raise the std of living of the ppl, wipe out poverty then think about becoming a superpower.
And ppl in WB and Kerala must stop voting in those stupid commies who give headaches to the central govt.

 

[Bushroda]

First of all, the heading is improper. a trillion dollar GDP means having an annual productivity of trillion dollars i.e adding $1 trillion every year whereas market value of a company is a static figure. An economy isn't just GDP but includes savings & many other attributes. So, the heading doesn't construe in any way that PetroChina is equal to Indian economy.

But still, it is indeed a great achievement for the company & even if the IPO is 160% over-valued it would still make it a very pricey company. It would've definately made many a millionaires by now.

 

[niaz]

First of all, the heading is improper. a trillion dollar GDP means having an annual productivity of trillion dollars i.e adding $1 trillion every year whereas market value of a company is a static figure. An economy isn't just GDP but includes savings & many other attributes. So, the heading doesn't construe in any way that PetroChina is equal to Indian economy.

But still, it is indeed a great achievement for the company & even if the IPO is 160% over-valued it would still make it a very pricey company. It would've definately made many a millionaires by now.

I am no economist nor expert in stock market. Looking at it from a different perspective altogether. Any one who has visited small European countries such as Netherland, Belgium, Denmark or Luxemburg will realize that it is neither the size of the economy nor of the stock market nor the size of individual companies that really matter. What really matters is the standard of living of the common man. Both India and China have a very long way to go to reach the standard of living of these small countries where no one is really poor.

 

[Bull]

I am no economist nor expert in stock market. Looking at it from a different perspective altogether. Any one who has visited small European countries such as Netherland, Belgium, Denmark or Luxemburg will realize that it is neither the size of the economy nor of the stock market nor the size of individual companies that really matter. What really matters is the standard of living of the common man. Both India and China have a very long way to go to reach the standard of living of these small countries where no one is really poor.

Its almost an impossible task to get to those standards, atleast for India.

 

[gpit]

First of all, the heading is improper. a trillion dollar GDP means having an annual productivity of trillion dollars i.e adding $1 trillion every year whereas market value of a company is a static figure. An economy isn't just GDP but includes savings & many other attributes. So, the heading doesn't construe in any way that PetroChina is equal to Indian economy.

But still, it is indeed a great achievement for the company & even if the IPO is 160% over-valued it would still make it a very pricey company. It would've definately made many a millionaires by now.

This however means that one year's work by India as a nation can buy (or is equivalent to the value of ) current PetroChina.

 

[bd_wonder]

i thought almost all sources pointed to india being a 800bn$ economy. anyway as bushroad pointed out the author is indian we can't expect high standards and uses faulty logic.
congrats to china good going for it. it's the largest company in world, not only that it's larger than the two largest usa companies combined. exxon and ge. that's great going. i think we'll see china topple usa in gdp ppp by 2015 at most perhaps.

i wonder though where muslim countries will be left behind or not.

 

[bd_wonder]

i hope the muslims are not left behind and overtake the world's biggest economic powers if maybe when they unite.
ameen.