China’s stock market celebrated the opening of the Communist Party Congress on October 15 by topping 6,000 points for the very first time.
This represents a six-fold increase in just over two years. Judged by their price-to-earnings ratios, Chinese stocks are now among the most expensive in the world, a fact that has led to repeated warnings of huge a huge bubble developing in the market.
Given how the Shanghai Composite Index has coasted through 5,000 and now 6,000 points, some analysts said there was still enough momentum to take it past 7,000.
At the end of September it was confirmed that mainland China leads the world in initial public offerings so far this year, with Sino-Ocean Land’s US$1.5 billion IPO taking the national total past US$30 billion. This figure was up 56.6% year-on-year and didn’t even include the bumper listings by China Construction Bank (CCB) and China Shenhua Energy, which raised US$7.72 billion and US$8.9 billion respectively.
A further 54 deals were said to be in the pipeline for 2007, which could generate as much as US$26.7 billion.
The next heavyweight addition in Shanghai is set to be PetroChina, which could raise as much as US$9 billion. Like CCB and Shenhua, it is one of the Hong Kong-listed companies that Beijing is keen to sell shares in the mainland in order to boost both corporate quality and supply of equity.
News of the impending IPO combined with rising oil prices saw PetroChina’s Hong Kong shares gain 13% on October 15. This gave it a market capitalization of around US$430 billion as well as General Electric’s spot as the world’s second most highly valued listed company.
This was enough to make Warren Buffet sell his stake in PetroChina, although he stressed this was a financial decision (his company Berkshire Hathaway has made around US$3.5 billion on a US$488 million investment) rather than one tied to the Chinese company’s interests in Sudan.
However, thanks to the discovery of new oil reserves, PetroChina is still expected to surpass ExxonMobil as the world’s most valuable business.