Pacific Money

Chinese Companies Fall Out of Top-Ten List

For the first time in many years, the top ten global companies by market value are all American.

The list of the top ten global companies by market value is not a particularly useful measure, since profitability and size aren’t always related, and temporary market trends can exaggerate the situation and distort longer term value. Still, when companies enter into or fall out of the list, certain trends can reflect wider conditions.

The latest list, published by Bloomberg based on closing prices on Wednesday this week, showed a pretty dramatic shift in the fortunes of China’s companies. Since the last quarter of 2006, when the Industrial and Commercial Bank of China (ICBC) climbed into the top 10, there has been at least one Chinese company present in nearly all the quarter-end rankings. Aside from ICBC, China’s giant state owned oil and gas company PetroChina Co. has been a regular on the list. China Mobile, the country’s largest mobile operator, along with ICBC’s fellow “Big 4” state owned bank – China Construction Bank (CCB), have also been regular members in recent years.

No Chinese firm is currently in the top ten global companies based on market value. In fact, other countries’ firms, including the Anglo-Australian BHP Billiton and Anglo-Dutch Royal Dutch Shell, as well as Switzerland’s Nestle and South Korea’s Samsung, have also slipped from the list. For the first time in many years, the ranking is entirely dominated by US firms. Johnson & Johnson and Wells Fargo & Co have climbed into the top ten to join Exxon Mobil, Apple Inc., Google Inc., Microsoft Corp., Berkshire Hathaway Inc., Wal-Mart Stores Inc., General Electric Co. and Chevron Corp.

There is a chance that PetroChina Co. may return to the top, given its importance in China’s energy mix, and expected effects from the changes to china’s fuel pricing system. ICBC and CCB meanwhile were among the biggest losers during China’s recent stock market sell-off. This was not surprising, given that the selling was triggered by jitters in China’s money markets and an apparent tougher line from the People’s Bank of China on liquidity in the financial system.

The list also reflects the almost exactly opposite fortunes of the American and Chinese stock markets this year. Whilst the S&P 500 has climbed 13.61% this year, the CSI300 has fallen by 13.26%. This is largely attributable to differing outlooks for the two economies; whilst the United States is apparently finally emerging from its post-crisis rut (albeit tentatively), China’s outlook is worsening as its failure to reform and tackle key economic and financial problems is finally catching up with it.

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Whilst stock markets in the U.S. dread Bernanke’s “exit”, at least the exit is supposed to be the result of stronger economic performance. In China meanwhile, the central bank is tightening whilst growth conditions are deteriorating. No wonder stock market investors are unhappy.