SHANGHAI - The
listing of China's largest oil and gas producer
PetroChina in Shanghai will help drain excess
liquidity in the domestic market and add weight to
industrial blue chips, which in turn will help
maintain the stability of the domestic capital
market, analysts say.
PetroChina on Monday
raised 66.8 billion yuan (US$8.96 billion) in
Shanghai by selling 4 billion A-shares, or 2.18%
of its expanded share capital, in the world's
biggest initial public offering
(IPO) this year.
Apart from the 4 billion A-shares issued
in the IPO, PetroChina's parent company China
National Petroleum Corporation (CNPC) holds the
other 158 billion A-shares, 86.29% of the total.
On Monday, heavy demand saw PetroChina's
shares rise from the flotation price of 16.7 yuan
to 43.96 yuan by the close, giving the group a
market capitalization of about $1 trillion. At
that level, it accounts for almost a quarter of
the entire Shanghai A-share market and makes it
the world's first trillion-dollar company, surging
past ExxonMobil, valued at $487.7 billion.
The PetroChina IPO surpassed the 66.58
billion yuan achieved by China Shenhua Energy
Company Limited, the country's largest coal
producer, last month.
PetroChina began
trading in Hong Kong and its American Depository
Receipts were listed on the New York Stock
Exchange in 2000. Citic Securities Co, UBS
Securities Co and China International Capital Corp
are the main underwriters of the issue.
"The return of blue chips indicates an
advance of service quality within the domestic
capital markets," said Zhu Congjiu, general
manager of the Shanghai Stock Exchange.
The share offering will reduce the weight
of bank and financial institution stocks to 30%
from 39% and help increase that of industrial
sectors such as power, coal and refining, said
Wang Jing, an analyst with Orient Securities Co
Ltd.
The A-share offering of China Railway
Engineering Corp, Asia's biggest railway and
tunnel contractor, will be discussed by officials
of China Securities Regulatory Commission this
week. If the offering is approved, the company
could raise around $2 billion in Shanghai,
according to company sources.
The stream
of offerings has "frozen" a considerable amount of
money as investors could have withheld their money
to buy blue chips, said analysts.
"Returning to the mainland's capital
market has been our long-cherished wish," said
Jiang Jiemin, president of CNPC. "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," he added.
Stocks not
so happy Shanghai shares ended Tuesday
1.74% lower with newly listed PetroChina losing
nearly 10% of its value and dragging the entire
market along with it, traders said. The Shanghai
Composite Index lost 97.88 to close at 5,536.57.
"PetroChina continued to retreat but I
don't think it will fall much below 40 yuan due to
strong buying interest from institutional
investors," Hua Xin, an analyst at Founder
Securities, was quoted as saying.
In Hong
Kong, meanwhile, shares were 1.71% higher on
Tuesday as bargain hunters helped the bourse
recover after the worst single day losses in its
history. The Hang Seng Index gained 495.81 points
to end a positive day at 29,438.13. On Monday, the
index of leading Hong Kong shares slid more than
at any time since the September 11, 2001, attacks
on the US. The benchmark index was driven downward
by 1,526.02 points, or 5.0%, to 28,942.32.
The decline followed comments by Prime
Minister Wen Jiabao at the weekend that an
investment program allowing citizens of mainland
China to invest directly in Hong Kong stocks,
dubbed the "through train program", would be
regulated. Investors feared that meant it could be
delayed.
More money to spend By
offering shares on the mainland, PetroChina is
trying to increase its crude oil production to
match its refining capacity, said Zheng Yi, an
analyst with Guangfa Securities.
And
according to PetroChina's prospectus, it will use
6.84 billion yuan and 5.93 billion yuan
respectively to boost production capacity at its
Changqing and Daqing oil fields. A total of 1.5
billion yuan will be used to build production
facilities at Jidong field, the country's largest.
It also plans to invest 17.5 billion yuan
to upgrade its Dushanzi oil refinery and ethylene
facilities and 6 billion yuan in expanding an
ethylene plant in Daqing, in northeast China.
Daqing, one of China's largest oil fields,
produced more than 43 million tons of crude oil
last year, accounting for almost 25% of the
nation's total. Changqing produced more than 10.5
million tons of oil in 2006.
Jidong Nanpu
Oilfield, the largest oil discovery by PetroChina
in four decades, will have an annual output of 10
million tons by 2012, according to the company's
plan.
"The oil fields that PetroChina is
putting money into will be China's major oil
sources in the future," said Han Xuegong, an oil
expert.
China will be able to produce
enough refined oil to meet domestic demand after
the completion of more than 20 refining projects
of at least 10 million tons by 2010, according to
the nation's medium and long-term plan for the oil
refining industry.
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