Dave Leggett | 5 November 2007
I know the oil companies aren't doing too badly out of high oil prices, but something going on in China is a bit startling. The state oil company, PetroChina, has just done a share offering of some sort on the Shanghai stock market. The market went mad for the shares (the price more than doubled on the first day of trading) and PetroChina is now the world's largest company, ahead of Exxon Mobil, as measured by market capitalisation.
PetroChina shares are trading at around 55 times earnings compared with Exxon's 13 and its revenue is around a quarter of Exxon's. Is there a bubble being created that will burst? Are Chinese investors piling in on one-way bets (ie the belief that prices will keep going up) with little heed to a comapny's real worth. Plenty say it looks that way. The Chinese authorities have managed the economy well in recent years, but over-inflated stock markets there may be vulnerable to any bad news. What with that and the latest Citibank losses, these are slightly nervous times all round.
The strategy people in automotive companies ought to be asking themselves the 'what if' questions with particular reference to investments in places that look risky.
I'm starting to get a small idea of the scale of things here in China, but really, I'm only scratching the surface of this vast country....
Given the startling complexity of obtaining a journalist visa for China - the code 'J2' is now indelibly stamped on my mind - it was with some surprise how swiftly I managed to sail through airport im...