PetroChina Surges 160% in Shanghai Debut, Topping $1 Trillion

Extremely oversubscribed shares of PetroChina nearly tripled to 43.96 yuan in their Shanghai debut Monday, despite an 8.2% drop to HK$18 for its Hong Kong-listed shares. That discrepancy may signal that overseas investors view PetroChina as overvalued. The better-than-expected rise in Shanghai catapulted PetroChina's global market capitalization to around $1 trillion, the largest in the world, exceeding the combined value of numbers two and three Exxon Mobil and GE, and larger than the entire value of many national exchanges. Before tripling in value this year, China's entire stock market was worth less than $1.1 trillion. PetroChina's Shanghai shares trade at a 154% premium to its Hong Kong listed shares -- higher than rival Sinopec's 145% premium. A Shanghai-based analyst says PetroChina's opening price is "really too high ... as far as corporate fundamentals are concerned." The analyst also warns if Beijing, which controls oil prices, doesn't raise them, high crude oil prices "will actually become a negative for PetroChina," since it also has large refining operations. PetroChina's Shanghai shares are valued at 54x analysts' 2007 earnings estimates, compared to 18x for global oil firms, but well below the 80-level of industry peers listed domestically. PetroChina's drop in Hong Kong can also be linked to China's premier throwing cold water on the Hang Seng's red hot rally -- sending the index down 5% -- by making it very difficult for a proposal to allow mainland investors to invest in Hong Kong to be approved in the near-term. PetroChina's ADRs rose 2.4% to $255.06 on Friday.

Sources: Bloomberg, Reuters, Wall Street Journal
Commentary: Buffett's PetroChina Sale May Signal Anxiety Over Chinese Bubble - WSJ • It's More than Just Baidu: 51 Other Ways to Invest in China • Are Chinese Stocks Too Hot To Handle?
Stocks to watch: PTR. Competitors: SHI, CEO, XOM,CVX. ETFs: FXI, PGJ, FNI

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