PetroChina first to reach $1,000bn cap

PetroChina first to reach $1,000bn cap

By Geoff Dyer in Shanghai

Published: November 5 2007 10:28 | Last updated: November 5 2007 10:28

PetroChina became the first company in the world to be valued at more than $1,000bn Monday after a dramatic stock market debut in Shanghai that saw its shares nearly triple in early trading.

Shares in the oil and gas company, which raised $9bn from the world’s biggest initial public offering so far this year, surged to Rmb48.60 at the start of trading from an offer price of Rmb16.70.

After slipping back during the day, the shares closed 163 per cent higher at Rmb43.96 in Shanghai, giving the company a market capitalisation more than double the value of the second-largest company, Exxon Mobil, which was worth $488bn at the close of trading on Friday in New York.

PetroChina sold 4bn shares in Shanghai, equivalent to just 2.2 per cent of its expanded share capital. Parent company China National Petroleum still owns 86 per cent of the shares. PetroChina’s Hong Kong shares, where the company listed in 2000, dropped 8.2 per cent to HK$18.

The massive demand for the PetroChina offering is the latest sign of the stock market frenzy in mainland China where share prices have increased almost six fold over the past two years. PetroChina attracted $456bn of subscriptions from retail and institutional investors in China.

However, the surge in the company’s share price was greeted by some analysts as a further sign that a dangerous bubble is developing in the mainland stock market, created by a mixture of capital controls and substantial liquidity. The company’s mainland shares are now trading at a premium of around 150 per cent to its Hong Kong shares.

Although large first-day jumps are commonplace in mainland Chinese IPOs, the scale of the increase in PetroChina shares surprised analysts who had been expecting a 100 per cent increase.

The PetroChina listing is the largest ever in the mainland market, surpassing China Shenhua Energy’s September IPO, which raised $8.9bn. A string of other Chinese companies are planning to raise money in the Shanghai market. Panzhihua Iron and Steel Group, the country’s 15th-largest steel mill, said Monday it intended to raise $1bn from a mainland listing, while SouthWest Securities, a brokerage in Chongqing, said it was considering a listing to bolster its capital.

The PetroChina debut did not prevent the Shanghai market from dropping 2.48 per cent to 5,634 points in the face of official comments warning investors to be cautious about both the mainland and Hong Kong markets. Regulators have urged mainland investment funds to moderate the amount of new money coming under management and have told funds planning overseas investments to limit the amount of money allocated to Hong Kong because of the recent surge in prices there.

Copyright The Financial Times Limited 2007
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