Chinese companies have dropped out of the ranks of the world’s 10 biggest stocks by market value for the first time since 2006 amid a cash crunch, slower growth and the biggest U.S. stock rally in a decade.
PetroChina Co., the state oil producer that was the world’s sixth-biggest company in May, lost $35 billion in market value this month to $214 billion, dropping to 12th, according to data compiled by Bloomberg based on closing prices Wednesday. Industrial & Commercial Bank of China Ltd. fell four places to 13th after losing $28 billion. All of the 10 largest stocks are now from the U.S., with Johnson & Johnson, the top maker of health-care products, and Wells Fargo & Co. overtaking the Chinese firms.
Chinese shares are under performing U.S. equities by the most since 1998 as the American housing and jobs markets improve. Stocks in the world’s second-largest economy, which climbed 345 percent over the past decade and accounted for half of the world’s top 10 in 2007, are falling. China is struggling to develop a consumer market while the government tries to clamp down on a credit boom amid concern that bad loans and bank failures will deepen the slowdown.
“Investors are looking at the U.S. because there are actually signs of growth, versus China where it’s exactly the opposite,” said Wayne Lin, a money manager at Baltimore-based Legg Mason Inc., which oversees about $654 billion in assets. “What you see is really the growth expectations flipping.”
The Shanghai Composite Index of domestic shares fell 0.1 percent to a four-year low Thursday amid concern the government’s curb on credit expansion may dampen economic growth. PetroChina rose 0.3 percent in Hong Kong, while ICBC increased 1.3 percent.
The MSCI China Index, which tracks shares trading in Hong Kong, has lost 15 percent this year after more than quadrupling from the end of 2002 to the end of last year.
The Standard & Poor’s 500 index added 0.6 percent to end the day at 1,613.22. It has advanced 13 percent this year, outperforming the Chinese measure by the most for any first half in 15 years. The U.S. benchmark has climbed 137 percent since March 2009, the biggest advance since the 1990s technology bubble.
PetroChina, the most valuable company in the world as recently as March 2010, has lost 28 percent this year in Hong Kong trading through Wednesday, wiping out $51 billion in value. The company posted an 8 percent decline in first-quarter earnings, its fourth straight drop, as demand fell for oil products. ICBC, the biggest Chinese lender, has tumbled 14 percent this month.
The seven-day repurchase rate, a gauge of interbank funding availability, jumped to a record high of 12.45 percent on June 20 before falling to 7.3 percent Wednesday.
It is still almost double this year’s average of 3.8 percent.
“We have had a longstanding concern over balance sheet quality of Chinese banks,” said Derrick Irwin, a Boston-based emerging markets money manager at Wells Capital Management, which oversees about $342 billion in assets. “If liquidity continues to be tight and growth continues to slow, the effects are difficult to predict.”
Fitch Ratings Ltd. estimates China’s total credit, including off-balance-sheet loans, swelled to 198 percent of gross domestic product in 2012 from 125 percent four years earlier.
That exceeded the growth seen before the banking crises in Japan and South Korea in the 1990s, according to Fitch.
Goldman Sachs Group Inc. and China International Capital Capital Corp. have cut growth projections for China this year to 7.4 percent, below the government’s 7.5 percent goal.
That would be the slowest expansion since 1990 and the first time that the government missed its target since 1998.
Information for this article was contributed by Michael Patterson, Weiyi Lim, Inyoung Hwang, Katie Brennan and Allen Wan of Bloomberg News.
Business, Pages 25 on 06/28/2013