By Jin Jing (China Daily/Agencies)
Updated: 2007-11-06 07:35

SHANGHAI: Asia's largest oil and gas producer PetroChina surged 163 percent on debut at the Shanghai Stock Exchange Monday, making it the world's largest company in market value, far ahead of second-placed US giant Exxon Mobil.

In the country's largest initial public offering (IPO), the shares opened at 48.6 yuan ($6.5), far exceeding analysts' expectations of around 35 yuan ($4.7). They closed a little lower at 43.96 yuan ($5.9), up 27.26 yuan ($3.6) from the offer price.

Combining the value of PetroChina shares traded in Shanghai, Hong Kong and New York, and the 157.9 billion shares, or 86 percent of the total, held by parent CNPC, the company's total market capitalization rose to just over $1 trillion, compared with Exxon Mobil's $488 billion.

The benchmark Shanghai Composite Index dropped 2.48 percent to close at 5634.45, with many institutional investors cutting holdings of large cap stocks to buy PetroChina, analysts said.

PetroChina will use the 66.8 billion yuan ($8.9 billion) proceeds from the IPO to fund oil and gas exploration and develop internationally to ensure stable domestic supply, Jiang Jiemin, chairman of PetroChina, said Monday before the trading started.

"PetroChina should shoulder economic, political and social responsibilities in this regard," he said.

Zhu Haibin, an analyst at Essence Securities, tried to explain the jump in the company's shares.

"Heavyweight stocks are often the favorites of institutional investors to prepare for the launch of stock index futures", possibly at the year end, he said.

The market value of PetroChina accounts for around 21 percent of the market total.

Turnover in PetroChina's shares was 50 percent Monday, much higher than the 30 percent in Shenhua Energy and Industrial and Commercial Bank of China on their debut, which showed that investors were very active, said analysts.

"The opening price of PetroChina exceeded most analysts' expectations by a wide margin. The price of over 40 yuan is far beyond the company's fundamentals," said Xu Bin, an analyst at Changjiang Securities.

The price-to-earnings ratio of PetroChina Monday was 52, compared to the market average of 42.

Wu Feng, an analyst at TX Investment Consulting Co Ltd, agreed, adding "the company's net profit growth is expected to remain at a slow 10 percent in each of the next three years."

PetroChina's net profit rose only 1.4 percent to 81.8 billion yuan ($10.9 billion) in the first half.

According to a recent report from Sinolink Securities, the oil and gas reserves of PetroChina amounted to 20.5 billion barrels in 2006, second only to 22.1 billion barrels of Exxon Mobil. PetroChina's output ranked fourth in the world, behind Exxon Mobil, Shell and BP.

Until Monday, coal producer China Shenhua Energy Co's debut in Shanghai in September was the largest for a domestic exchange, raising 66.58 billion yuan ($8.91 billion).

But there are plenty more big IPOs in the pipeline.

China Mobile Corp, whose shares traded in Hong Kong are valued at HK$3.05 trillion ($391 billion), is among several other big names planning IPOs in coming months.

The H shares of PetroChina dived 8.16 percent to close at HK$18 Monday, as the Hang Seng Index fell 1526 points, or 5 percent, the biggest one-day loss.