Shanghai: Asia’s top oil and gas producer PetroChina became the world’s largest company by market value on 5 November, overtaking US giant ExxonMobil as its share price surged by 191%.
The milestone underlined the ongoing boom on China’s markets, which have been flooded with ready cash brought by hungry investors who have disregarded warnings that the China stock bubble is destined to burst sooner or later.
PetroChina already traded in Hong Kong and New York, but its new shares made their debut on 5 November on the Shanghai bourse after the largest initial public offering (IPO) ever in mainland China.
The shares, priced at 16.7 yuan for the IPO, were trading at 48.6 yuan ($6.5) shortly after the market opened. That put the value of the company higher than the roughly $500 billion capitalisation of ExxonMobil.
In terms of earnings, however, PetroChina does not even make it into the top 50 companies of the world, which has raised a red flag both about the vaulation of the firm and the overall sustainability of the Chinese stock boom.
The Chinese bourse surged 130% last year and is up around 110% so far this year. Many companies are trading at 45 to 50 times earnings, much higher than many shares on other international bourses.
Despite the massive surge in PetroChina shares on 5 November, the state will maintain a firm hand in the company, controlling an 86% 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, an analyst with Northeast Securities based in Shanghai, said ahead of Monday’s opening. But shares have often still been surging, and PetroChina’s debut was no exception.
“Its opening price exceeded our estimates,” said Wu Feng, an analyst at TX Investment Consulting Co, who said a “reasonable” vaulation for PetroChina shares was around 35 yuan.
The IPO of PetroChina, which raised nearly nine billion dollars in its sale of four billion shares, is the world’s biggest this year and the largest in mainland China’s history.
It eclipsed the record of China’s top coal company, Shenhua Energy, which raised 66.58 billion yuan last month, while overtaking China Construction Bank’s $7.7 billion listing in September. China had six of the world’s largest IPOs this year.