One Kind of Miracle

“PetroChina Co., the main oil and gas producer in China, became the world's biggest company in the course of a few hours of trading yesterday. Or did it?

“PetroChina's stunning debut on the Shanghai Stock Exchange again demonstrated the force of China's bull market, which has more than doubled its benchmark stock index so far this year…

“By some measures, PetroChina could now be valued at more than $1 trillion, which would make it by far the world's largest company by market capitalization.

“Yet the soaring valuations put on PetroChina and other Chinese-listed companies seem to say more about the problems and idiosyncrasies of China's market than the performance of the companies themselves.

“In fact, it is difficult to determine the real value of Chinese government-controlled companies like PetroChina… They have complicated corporate structures that keep most of their shares locked up in government hands, with the few that are publicly traded spread across different markets. The scarcity can drive up prices. And the problem is compounded by China's capital controls, which can cause domestic prices to differ greatly from those on other markets…

“Whatever its prospects, PetroChina is also benefiting from the overall enthusiasm of Chinese investors, whose unchecked eagerness to put money into stocks has drawn increasing official concern. The seemingly unstoppable rise of China's stock market has drawn worrisome comparisons to the bull markets in Japan and Taiwan in the 1980s, and to the U.S. technology-stock bubble.

“‘It's very difficult, almost impossible, to predict bubbles. But what we can say is that, based on historical examples, this kind of miracle is never sustainable,’ says Zuo Xiaolei, chief economist for China Galaxy Securities in Beijing. ‘Whether foreign investors believe in this or not is up to them’.”

(“Moving the Market: How Big Is PetroChina? Market Cap May Exceed $1 Trillion -- or Not.” Andrew Batson and Shai Oster. Wall Street Journal: November 6, 2007. pg. C.3)

THE REAL VALUE of any thing is what the next buyer is willing to pay for it, not what the former buyer paid. It is up to us to invest meaning into whatever we wish. Depending on where we stand, we will perceive our real dreams and fears.