The Chinese energy company PetroChina has become the world's largest company by market value after its trading debut on the Shanghai Stock Exchange Monday. Kate Woodsome explains from VOA's Asia News Center in Hong Kong how a company that earns less than comparable operations has become so valuable.

PetroChina made a stellar trading debut in Shanghai Monday, as hungry investors helped China's leading oil and gas producer surpass the value of the U.S. giant ExxonMobil.

PetroChina shares, which have been trading on the New York and Hong Kong markets since 2000, rose two and a half times in value on their first day of trading in Shanghai - from the opening price of $2.24, to about $5.90 at the market close.

The initial public offering of four billion shares raised $9 billion for the company. That made it the world's biggest IPO this year, and the biggest ever in China.

The combined value of PetroChina shares in Shanghai, New York and Hong Kong now exceeds $1 trillion - far surpassing ExxonMobil's value of roughly $500 billion.

PetroChina's massive market value bears little relation to its profitability, however. In the first half of this year, the company's net income was about $10.9 billion. ExxonMobil earned $19.5 billion during the same period.

Howard Gorges of South China Holdings in Hong Kong says the high price of PetroChina shares reflects Chinese investors' frenzy for stocks in general.

"There's a huge amount of money in Shanghai that's willing to buy literally anything - quality or speculative," he explained. "And so that market has gone up several hundred percent in the last year, 18 months."

To put the Chinese eagerness for stocks into perspective, PetroChina's shares dropped more than eight percent in Hong Kong Monday, to close at $2.30. Hong Kong's market as a whole fell 5 percent.

John Vautrain is senior vice president of Purvin and Gertz, an energy consultancy in Singapore. He says PetroChina's refining operation is not performing well, because the Chinese government has placed limits on how much refiners can charge for gasoline.

"Those prices are controlled at a level below international prices. And that's been low enough to create losses in the refining part of the company," he said.

Vautrain says PetroChina makes up for those losses with earnings from crude oil production. However, PetroChina's earnings are currently limited to China, while ExxonMobil makes money in growing markets around the world.

But Gorges of South China Holdings says investors should not underestimate PetroChina's potential.

The Chinese government holds 86 percent of the company's shares. China is expanding, and Gorges says Beijing is likely to favor PetroChina when it does oil deals with governments and companies around the world.