Today, the world’s biggest bank delivers dreadful results. Citigroup recorded a net loss of $9.8 billion, driven by a whopping $18.1 billion in pre-tax write-downs and credit costs on exposure to subprime mortgages.
Worse, it is no longer just collateralised-debt obligations and other complex securitised products that are hurting the world’s largest bank (by assets if no longer by market value). Credit cards and other consumer-finance businesses are deteriorating fast as America’s economy flirts with recession.
Capital markets around the world ended the day all in red digits. What more can we expect the upcoming weeks when other leading financials record their 4Q and FY2007 results? How much more write downs can capital markets digest? How can we fix it?
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And in a class all by itself, the US$1 trillion (1,000,000,000,000) club.
On Monday, the 4 billion A-share offering, priced at 16.7 yuan per share, finished its first day of trading on the Shanghai Stock Exchange at 43.96 yuan, rising as high as 48 yuan intraday. At US$1.005 trillion, PetroChina’s market cap is more than twice that of its US peer, Exxon Mobil (USD $486 billion), even though Exxon Mobil generated four times as much revenue last year and trades at only a quarter of PetroChina’s price to earning ratio, 13 to PetroChina’s 55.
But the craziness doesn’t end there. The lofty market cap comes with an asterisk: US$1 trillion only if you go by PetroChina’s local valuation. Shares traded overseas (Hong Kong and New York) values the company at roughly US$400 billion. One HK share (H-share) confers equity holders the same amount of ownership as one A-share, and one share of ADR traded on the NYSE grants 100 times as much ownership.
While PetroChina’s A share closed up today at 43.96 yuan, its H-share finished down 8.2 percent at HKD $18, or 17.65 yuan (1 yuan=1.02 HKD). The gaping difference is a function of many factors: Beijing’s restriction on capital flow, lack of investment choices in China, and of course, out-of-control greed coupled with widespread ignorance on the part of Chinese retail investors.
In a related story, billionaire investor Warren Buffet sold his entire PetroChina stake several months ago, calling the price action in China “carried away.”
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Seven exchanges. Six countries. Two continents. One global market group.
Above the advertisement of the first truly global exchange group; NYSE Euronext. I love the slogan and love the advertisement even more! The advert displays distinctive buildings of each single country represented in NYSE group including the manor houses in Amsterdam (left corner)!
Check out the official webpage of NYSE Euronext for all informatives concerning this newly created global equity stock exchange. It is created via a merger between the New York Stock Exchange and Euronext.
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Yesterday, stock markets around the world felt sharply amid worries about an economic slowdown in China and the United States.
It started at Shanghai’s stock market which ended 9% lower as the day before. Subsequently it negatively affected European and US stock markets with sharp drops as well. As a scholar this is hard evidence that China is gaining importance not only as manufacturing powerhouse but also in the global capital market. Furthermore, capital continues to fluid around the globe, and economies and capital markets are increasingly interlinked these days. The New York Times published an effective visualisation of yesterday’s happening.
Will the market bounce back today? Upon now the answer seems negative because of remaining “Asian” worries on the American economy.
Another NYTimes photo report on yesterday’s events can be found here
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