In 2011, China had three of the world’s ten most valuable companies – PetroChina, Industrial & Commercial Bank of China, China Construction Bank — according to the Financial Times 2011 annual snapshot of the world’s largest companies, ranked by market capitalization (see top 10 chart below). Going off of the fourth quarter’s statistics, rounding out the top 10 are Exxon Mobil, Microsoft, Chevron, IBM, Royal Dutch-Shell, Wal-Mart, and Apple. BHP and HSBC, two companies once among the top 10 both correlated strongly to China’s economy. Is that a sign of weakness now that they are no longer among the top 10? That’s for you to decide, what we do know is that all these corporations derive the majority or a significant and growing proportion of profits from outside the U.S.!
This dramatic rise of China’s largest public companies gives a remarkable picture of how corporate fortunes have changed over the past few years. In 2010, the 500th company was worth $10.1 billion in compared to $19.3 billion in 2008. Oil companies overtook banks as the most valuable sector, with 15 banks leaving the list and the number of oil companies increasing by one.
China’s Top Three Companies by Market Cap
#3 PetroChina (NYSE: PTR) slipped, falling behind both Exxon Mobil and Apple as the world’s largest energy company. PTR once was the world’s first trillion-dollar company after shares tripled in value on its flotation on the Shanghai stock market in 2007.
#5 Industrial & Commercial Bank of China (ICBC) is China’s largest bank and the largest bank in the world in terms of market cap, deposits and profits.
#10 China Mobile (NYSE: CHU) soared in the second half of 2011, to make its mark and land on the bottom of the list as they continue to grow, capitalizing on the growing number of Chinese people ascending from poverty to middle class status.
More China Companies May Soon Rank in the Top 10
China Construction Bank (CCB) started the year as #7 on the list and had a lengthy term before that ranking in the Top Ten as they are not only the second largest bank in China but the second largest bank in the world by market cap.
Once among the Top Ten, HSBC, the world’s top ranked bank brand, is rapidly becoming more of a China play. Its CEO relocated to Hong Kong from London to capitalize on accelerating growth in China. Furthermore, over the past few years 60% of HSBC’s worldwide profits came from Hong Kong/China/Asia-Pacific, if you exclude last year’s massive US write offs.
Two other Chinese groups have also joined the ranks near the top 10: China Life (NYSE: LFC), the #2 insurance company in the world behind AIG and one of our favorite energy plays, Sinopec (NYSE: SNP) the oil & gas conglomerate. In November 2011, Stocks on Wall Street issued a BUY rating for SNP and quickly the stock soared, well over 40% in a matter of only four months, however following the trend of the market in recent months, SNP took a significant dip giving back most of the gains. While we were able to effectively still get out while making a profit, we only see this sharp decline as a great buying opportunity for long-term investors. To read our previous report on SNP simply follow the link “Sinopec Poised for Strong 2012 Run” Also, as noted earlier, Australia’s BHP Billiton, once a stable on the Top 10 List also correlates strongly to China’s economy.
Our Take: China may be experiencing a long overdue pull back & correction, but long-term indicators remain bullish. Drivers of growth will continue to be outside the U.S. – especially in Energy, Technology and Industrials.
Financial Times 2011 Global 500 List Ranked by Market Capitalization