By Dong Zhixin (chinadaily.com.cn)
Updated: 2007-11-05 17:36

China's main stock index fell more than two percent Monday as PetroChina became the world's largest company by market value after its mainland debut.

Jiang Jiemin, chairman of PetroChina, hits the gong during a ceremony to mark PetroChina's listing in the trading hall of the Shanghai Stock Exchange November 5, 2007. [Agencies]

The Shanghai Composite Index dropped 2.48 percent to close at 5,634.45 points, while the smaller Shenzhen Composite Index shed 0.68 percent to 1,377.19 points. The CSI 300 Index covering major companies in the two bourses fell 2.06 percent to 5,360.30.

The sell-out came as initial public offering (IPO) shares of PetroChina started trading in Shanghai. The country's biggest oil company opened at 48.60 yuan, nearly tripling the issue price of 16.70 yuan, before easing slightly to end the session at 43.96 yuan.

That closing price helped the company become the world's first company to be valued at $1 trillion, larger than the combined value of Exxon Mobil Corp. and General Electric Co, according to Bloomberg News.

"The mainland offering will give domestic investors opportunities to share the outcome of PetroChina's fast growth and help expand the company's business in the mainland," said Jiang Jiemin, president of PetroChina's parent China National Petroleum Corporation (CNPC).

In contrast with PetroChina's spectacular performance, Asia's largest refiner Sinopec plunged 8.88 percent to close at 25.96 yuan per share, bringing down the Shanghai Composite Index by 44 points.

Some institutional investors are dumping Sinopec shares to buy into its major rival, analysts explained.

Another factor affecting the market is Premier Wen Jiabao's pledge to prevent asset bubbles.

The government will take measures to prevent asset bubbles and avoid huge fluctuations in the stock market, Wen said during a visit to Uzbekistan. It is the government's responsibility to ensure a fair, healthy and transparent stock market, he said.

Wen's remarks prompted panic selling in the real estate shares. China Vanke tumbled 8.04 percent to 35.90 yuan.

Also dragging down the market is a notice from the China Securities Regulatory Commission, urging fund companies to avoid blind expansion and forbidding them to mislead consumers in marketing or engage in speculative investment.

Financial shares were weak, as the Industrial and Commercial Bank of China fell 4.28 percent to 8.28 yuan, followed by a 3.83 percent drop in China Construction Bank to 10.80 yuan.