Tuesday, November 06, 2007

One Trillion Dollars


China Petroleum, the People's Republic of China's state-owned gas company, has now reached a market capitalization of one trillion US dollars, making it the largest company in the world by far. Bigger than second and third place Exxon-Mobil and General Electric combined. Interestingly enough this stock seems to be priced right. Petroleum fuels everything (for the time being anyway); China's economy is $10 trillion per year, and thus at $1 trillion CNP is priced at 10% of revenues, a pretty middle-of-the road valuation.

Well what does this say? China is on the move obviously and the market thinks this will continue. And perhaps people are substituting out of 'western' assets due to the real estate bubble's foretold collapse. Too this means that the central bank of China's policy now of holding down the yuan is increasingly unsustainable. Buy low sell high.