Ten years ago, PetroChina peaked on its first day of trading in Shanghai. But since then, the state-owned energy producer has lost about $800 billion of market value, reports Bloomberg.
This is the world’s biggest-ever “wipeout of shareholder wealth,” according to Bloomberg, and it may only get worse. The average analyst estimate, created by Bloomberg, shows that PetroChina’s Shanghai shares will sink 16 percent to an all-time low in the next year.
Why has it been sinking so low? According to Bloomberg, the stock has been pummeled by some of China’s biggest economic policy shifts over the past 10 years. This includes the government’s attempt to move away from a commodity-intensive development model. The government also wants to hone in on speculative manias of the sort that turned PetroChina into the world’s first trillion-dollar company in 2007.
Oil has also dropped 44 percent over the last decade. Chinese President Xi Jinping has big plans to promote electric vehicles. The company also shares trade at 36 times estimated 12-month earnings, a 53 percent premium versus global peers, reports Bloomberg.
There are also factors that are outside the company’s control. The global financial crisis was just around the corner in 2007, and “bubbles in both oil and the Chinese equity market were primed to burst,” writes Bloomberg.
However, even after the company’s slump, “PetroChina’s forward price-to-earnings ratio in Shanghai is 80 percent higher than its historical average,” according to Bloomberg.
Andrew Clarke, director of trading at Mirabaud Asia Ltd. in Hong Kong, was asked by Bloomberg if PetroChina will ever get back to its 2007 high. Clarke, 50, said, “Maybe one day, but it depends on how long your time frame is. I’m pretty sure I will be dead before that happens again.”
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