Bellerbys Economics - Mr Stephenson

Wednesday, November 07, 2007

Petrochina - World's no.1

Investors are still reeling from the launch of Petrochina on the world's stock markets on Monday - mostly in Shanghai and Hong Kong.

Incredibly, the company was valued at $1 trillion - the world's first trillion-dollar company - and incidentally making it the world's eleventh-biggest economic unit after Brazil! This valuation is more than twice as big as any other company in the world.

Questions are already being asked about whether this can possibly be a true valuation. It will have been inflated by the usual first-day bubble effect of institutional investors trying to bull the market to make a quick killing - added to this is the mid-term bubble we are seeing in the Chinese stock markets - Shanghai has doubled so far this year - this can't go on forever - but no one wants to jump ship whilst the bubble continues to rise, this is always the problem. However, it's worth noting that super-investor - and the world's third richest man, Warren Buffet - SOLD HIS SHARES in Petrochina late on Monday, after having made $3.5billion profit on an earlier investment of $0.5bn. Perhaps he knows something we don't.

However, the underlying factors for Petrochina look strong - good oil stocks, high levels of investment in new fields in Africa and protected from domestic competition at home.

So, overall, it's likely that the valuation may slip a little over the next couple of weeks - but should remain strong for the mid-term.

More than anything, this event has signalled once again the shift in the world economy to the East with China now having two strong stock exchanges in Shanghai and Hong Kong and a number of smaller active stock exchanges in the south.


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