Oil for Thought

Yesterday, PetroChina (NYSE:PTR) IPOed (Initial Public Offering) on the Shanghai Stock Exchange and became the world’s biggest company in terms of market capital. The company is now estimated to be worth over $1 trillion. To put that value into perspective, the previous record holder, ExxonMobil (NYSE:XOM) is worth $493.84 billion. PetroChina’s IPO is a clear testament to how rapidly China’s economy is growing. People are having more and more disposable income and directly injecting that money into the stock market. With all this free floating money, companies are entering the market with lofty values. While PetroChina is worth more than ExxonMobil in regards to market capital, PetroChina only makes a quarter of ExxonMobil in revenue, and PetroChina also has less oil and gas reserves than ExxonMobil. The Chinese economy has been able to sustain such rapid growth, and as a result can sometimes overvalue its companies, but the real question is when does the bubble pop?


-James