PetroChina briefly boasted a paper worth of a trillion dollars when it floated 2.2pc of its sharesPosted on 12/02/2007 4:27:26 PM PST by BGHater
The newly floated oil giant PetroChina has lost a third of a trillion dollars in nominal value in just three weeks, plummeting to a fresh low yesterday as angst gripped the Shanghai stock market.
The benchmark CSI 300 index of Chinese stocks has dropped 18pc in November, the worst one-month fall in more than a decade. The bourse has tumbled 22pc since peaking in mid-October after a wild speculative boom that saw prices triple in a year - much like the final phase of Japan's Nikkei frenzy in 1989. It now qualifies as an official "bear market".
What began as a bout of profit-taking in Shanghai now risks turning into a serious correction as the government steps up efforts to ration credit and drain liquidity. Beijing is alarmed by 6.5pc inflation and surging food prices, afraid it could set off political unrest amongst China's vast army of footloose urban migrants.
PetroChina briefly boasted a paper worth of a trillion dollars when it floated 2.2pc of its shares on November 5, vaulting ahead of Exxon to become the world's richest corporation by far - in theory.
But US investor Warren Buffett earlier cashed in his minority holding for a 600pc gain of $3.5bn (£1.7bn), warning that the Shanghai boom had become unstable. The Shanghai market still remains expensive with an average price to earnings ratio of 55.
PetroChina's trillion-dollar tag was widely viewed as absurd given the company's struggle to tap new oil reserves around the world.
The share price has since fallen 37pc. Shenhua Energy is down 32pc, a fate shared by a long list of resource, industrial, and trading companies deemed sensitive to the credit cycle.
Among the losers yesterday were: Cosco shipping (down 5.5pc on the day); Harbin Pharmaceutical (-5.65pc); Aluminium Corp of China (-4.9pc); Wuhan Iron & Steel (-4.27pc) and Baoshan Iron & Steel (-3.9pc).
The tumbling stock market may be a warning that the Chinese economy is headed for a sharper slowdown than expected after years of torrid growth, reaching an annual rate of 12pc this autumn.
The country is heavily reliant on exports, which make up 40pc of GDP. Most of the goods are low-margin consumer items shipped to the US and Europe.
A study this month by China's commerce ministry said the fall-out from America's sub-prime crisis posed a serious economic threat. "If demand in the US drops further, Chinese exporters will be devastated by a rapid and continuous fall in orders," it said.
Nouriel Roubini, an economist at New York University, said China lacks sufficient demand at home to withstand a serious US downturn.
China could now pay a heavy price for holding down its currency and relying for too long on a mercantilist export model. Investment is 43pc of GDP, and much of it has gone into factories and plant to produce goods that the world cannot easily absorb.
PetroChina briefly boasted a paper worth of a trillion dollars when it floated 2.2pc of its shares
It’s a good thing they invested most of their assets in dollars, huh?
A Chinese company is one of the proposers for the TransAlaska Natural Gas Pipeline. Hope they are still there in Feb when Gov Palin presents her recommendation to the Legislature. Actually, hope any of the proposers are still there in Feb.
Hold on Hop Sing, you are about to have a very rough ride, oil should be back at $50 to $60 a barrel soon.
Enjoy your trip.
Cry me a river...a yellow one if it will make you feel better.
As the lead foot falls....
The Chinese Government has been subsidizing American consumers for many, many years. That trade surplus (which is a bogus concept) is going to disappear in the relatively near future.
Contrary to what the Chinese government has thought, basic financial and economic principles apple in communist countries over the long term.
It’s 1929 for China.
Most of which is sold for very low margins, or at a loss when everything is factored in. I keep saying that the Wal-Mart negotiators are going to be the downfall of communism in China.
>> I keep saying that the Wal-Mart negotiators are going to be the downfall of communism in China.
Duly noted, and filed in the “interesting things to think about” box!
Don’t they have % signs on their typewriters?
Just wait until China decides it has to sell its US Treasuries to raise cash. We'll all be subsisting on cactus spine soup.
I have seen anecdotal evidence that just about everything China produces is sold at a loss. It’s a central command economy. That kind of economy is not run to make profits, but to accumulate power for the party leadership.
There are no economic checks and balances, there is no accountability. Sooner or later, it will come to a bad end.
Comments gentlemen?
If and when they do, it would be at a heavily discounted price and would lower interest rates in the United States. You must keep in mind that the US Government doesn't have to buy them back.
Yeah, their $400 billion in Treasury holdings will crush our $14 trillion economy. LOL!
Freep-mail me to get on or off my pro-life and Catholic Ping List:
Please ping me to all note-worthy Pro-Life or Catholic threads, or other threads of interest.
Toddsterpatriot is deeply saddened. LOL!
“If and when they do, it would be at a heavily discounted price and would lower interest rates in the United States. You must keep in mind that the US Government doesn’t have to buy them back.”
And the more the dollar inflates, the less treasuries bonds are worth in real terms, kind of self extinguishing debt. I have also heard that we have a defacto tax on every country that has to purchase dollar denominated oil. (Inflation transfers wealth to the US because they have no choice but to hold inflating dollars to buy energy.)
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.