“Welcome to perhaps the biggest bubble in the last 100 years…”


The title of this post is a quote from the hedge-fund buddy of mine in London who sent me the following article. Cheers!

PetroChina’s Value Tops $1 Trillion, Surpassing Exxon
2007-11-05 03:34 (New York)
By Ying Lou

Nov. 5 (Bloomberg) — PetroChina Co. almost tripled on its
first day of trading in Shanghai, becoming the world’s first
company to be valued at $1 trillion, larger than the entire
Russian stock market.
PetroChina shares rose to 43.96 yuan from the sale price of
16.7 yuan, giving the state-owned oil producer a greater market
value than Exxon Mobil Corp. and General Electric Co. combined.
The rally makes PetroChina shares four times more expensive
than those of Exxon, even though China’s biggest oil producer
has a quarter of the revenue. China’s stock market was valued at
less than $1.1 trillion before tripling this year and giving the
communist nation five of the world’s 10 biggest companies.
PetroChina’s valuation is “an indication of China coming
of age and also of its stock market bubble,” said Hugh Young,
who oversees $50 billion at Aberdeen Asset Management Asia Ltd.
in Singapore.
The oil producer’s Shanghai listing pushes China’s stock
market beyond the U.K. as the world’s third-largest. PetroChina
trades at 55 times earnings, four times Exxon’s ratio of 13
times earnings and near the 58 times for Google Inc., the
world’s most-used Internet search engine.
In Hong Kong, PetroChina fell 8.2 percent to HK$18. Exxon
is worth $488 billion on the New York Stock Exchange.

`Sense of Responsibility’

“I feel very excited today and also feel a very strong
sense of responsibility,” Chairman Jiang Jiemin said at the
Shanghai Stock Exchange. “This is PetroChina returning to our
investors and society.”
Jiang struck a gong as the market opened at 9:30 a.m., then
toasted the start of trading with a glass of red wine.
China’s largest oil and gas producer had 20.5 billion
barrels of oil and gas reserves in 2006, compared with 22.1
billion for Irving, Texas-based Exxon, data compiled by
Bloomberg show. PetroChina has been adding new reserves at an
average annual rate of 5 percent for the past three years, a
faster pace than Exxon, Royal Dutch Shell Plc and BP Plc, the
world’s largest oil companies by sales.
The share sale, the world’s biggest this year, surpassed
the 66.6 billion yuan raised by China Shenhua Energy Co. in
September. PetroChina raised 66.8 billion yuan selling 4 billion
shares last week as investors applied for more than 3.3 trillion
yuan of stock, almost 50 times the amount PetroChina sold.

Record Oil

Those investors were until now prevented from directly
buying PetroChina stock, missing out on a 15-fold surge as
economic growth turned the nation into the largest oil consumer
after the U.S. and as crude prices reached a record $96.24 a
barrel in New York.
The CSI 300 Index of shares listed on the Shanghai and
Shenzhen exchanges has increased about 170 percent this year as
mainland Chinese investors seek returns on $2.3 trillion of
savings, raising investor concerns that the market is too
Billionaire investor Warren Buffett’s Berkshire Hathaway
Inc. sold its stake in PetroChina this year, reaping an
eightfold gain that contributed to a 64 percent increase in
third-quarter profit for the Omaha-based company. Berkshire had
2.34 billion shares as of the end of 2006, the largest holding
after state-owned China National Petroleum Corp.
Buffett said on Oct. 24 that Chinese share prices have
risen too fast.

`Carried Away’

“It’s easy to be carried away in the stock market when
things are going very well,” he said in the northern Chinese
city of Dalian. “We at Berkshire never buy stocks when we see
prices soaring.”
Gains in PetroChina’s shares in Shanghai may have more to
do with Chinese investors seeking better returns than the
outlook for the company’s exploration and production operations,
or its refining business, known as downstream, said Larry Grace,
an oil analyst at Kim Eng Securities Co. in Hong Kong.
“Production is static with limited upside for the next
three to four years,” Grace said. “As for the downstream, the
price controls and overall regulatory trend limit the company’s
China controls fuel prices to shield consumers in the
world’s most-populous nation from accelerating inflation. The
policy limits the ability of PetroChina and China Petroleum &
Chemical Corp. to pass on the burden of higher crude oil costs.
The other Chinese companies that rank among the world’s 10
largest by market value are China Petroleum, known as Sinopec,
China Mobile Ltd., Industrial & Commercial Bank of China Ltd.
and China Construction Bank Corp.
“A-share prices don’t reflect global benchmarks of
value,” said Lorraine Tan, head of equity research at Standard
& Poor’s Investment Services in Singapore. “There should be
other measures of a company’s position, including revenue and
profitability. Market cap is not necessarily accurate.”


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