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PetroChina's domestic listing breaks record

by Staff Writers
Shanghai (AFP) Oct 30, 2007
PetroChina said Tuesday it had raised nearly nine billion dollars in the nation's largest initial public offering amid a continuing boom in China's stock market.

Asia's biggest oil and gas producer said it had raised 66.8 billion yuan (8.9 billion dollars) in China's largest ever initial public offering (IPO).

The figure eclipses the record of China's top coal company, Shenhua Energy, which raised 66.58 billion yuan last month.

It also highlights once again the major rally in the Shanghai stock market, which has soared over 400 percent since the end of 2005.

PetroChina, already listed in Hong Kong and New York, priced the offer of four billion yuan-denominated A-shares at 16.70 yuan each, the top end of an indicative range, it said in a statement with the Shanghai Stock Exchange.

If the firm's share rise strongly after their debut its market value could exceed that of US oil giant Exxon Mobil, making PetroChina the world's largest company by capitalisation, said Li Guohong, Beijing-based analyst with Galaxy Securities.

Its current market value stands at around 440 billion dollars, only second to Exxon Mobil with a capitalisation of over 500 billion.

Li forecast the opening price of PetroChina on its Shanghai debut, widely expected to be on November 5, would be above 30 yuan, more than doubling the IPO price of 16.7 yuan and elevating its value toward that of Exxon Mobil.

"I would say that's quite likely," Li said when asked if PetroChina would then overtake Exxon Mobil to become the world's biggest company by stock value, echoing assessments in the Chinese state-run press.

Other analysts also predicted that PetroChina's domestic stock value would soar.

"It's absolutely likely that investors will stir up its share prices in such a red-hot market," said Cheng Liyang, a Shanghai-based analyst with Everbright Securities.

The stock offer attracted record subscription funds of 3.37 trillion yuan, with the institutional tranche about 48 times oversubscribed and the retail portion about 51 times oversubscribed, according to the firm's statement.

PetroChina's Hong Kong-listed shares have a price earnings ratio, or a measure of stock valuation, of around 20, compared with around 10-14 for foreign oil majors, Li said.

Li attributed the premium on PetroChina's shares to favourable government policies.

"Foreign oil companies need to tackle government restrictions like resources tax when exploring for new oil fields," he said.

"On the contrary, Chinese authorities have always encouraged major state oil firms in new exploration and development."

Li also noted that although the oil reserves of PetroChina were not as large as Exxon Mobil's, they were expanding quickly thanks to the favourable government policies.

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