Oct. 29 (Bloomberg) -- China Life Insurance Co. surpassed AT&T Inc. in market value, giving China more of the world's 10 largest companies than the U.S. for the first time.

Five of the 10 biggest companies by market capitalization are now Chinese, compared with three that are located in America, after China's benchmark stock index almost tripled this year. The rally has prompted securities regulators to say this month that the market holds ``great risks'' as the nation's households pour more of their $2.3 trillion savings into shares to beat inflation and profit from the fastest growth among major economies.

``China is one of the most exciting economies,'' said Jim Rogers, the chairman of New York-based Beeland Interests Inc. ``The market is willing to pay a lot more for future growth.''

China Life, the nation's largest insurer, gained 1.1 percent in Hong Kong and added 6.7 percent in Shanghai, valuing the company at 1.94 trillion yuan, or $259.1 billion. The Beijing- based firm after the close of trading today posted a third- quarter profit of 7.82 billion yuan ($1 billion), sparked by investments in China's stock market.

San Antonio-based AT&T, the biggest U.S. phone company, was valued at $255.6 billion as of 9:51 a.m. in New York.

Biggest Chinese Companies

The People's Bank of China has told lenders to set aside more reserves eight times this year, most recently on Oct. 13, and has raised interest rates five times to help cool the economy.

China Life, PetroChina Co., China Mobile Ltd., Industrial and Commercial Bank of China Ltd. and China Petroleum and Chemical Corp. are now in the list of the world's 10 biggest companies by market value. Only two of those are in the top 50 by sales.

The three U.S. companies in the top 10 by market value are Exxon Mobil Corp., General Electric Co. and Microsoft Corp. Russia's Gazprom OAO and The Hague-based Royal Dutch Shell Plc complete the list. Exxon Mobil retains its No. 1 place.

The CSI 300 Index, which tracks yuan-denominated shares traded on the Shanghai and Shenzhen stock exchanges, has risen 170 percent this year, the best performance among 90 global benchmarks tracked by Bloomberg. Hong Kong's Hang Seng Index, which is dominated by Chinese companies, has gained 58 percent.

Hong Kong's shares have surged since China's government said on Aug. 20 that some of its 1.3 billion citizens will be allowed to invest in the city's stock market, with the local benchmark having jumped 55 percent in that time. All of China's five biggest companies have Hong Kong listings, enabling them to tap global investors that are restricted from buying shares on mainland exchanges.

U.S. Shares

In the U.S., the Standard & Poor's 500 Index has climbed 8.9 percent in 2007. The 1,856-member Morgan Stanley Capital International World Index is up 13 percent this year.

The rally in Hong Kong and mainland Chinese markets has boosted valuations for Chinese companies past their global peers. Citic Securities Co., China's biggest publicly-traded brokerage, trails only Goldman Sachs Group Inc., Morgan Stanley and Merrill Lynch & Co. in market value among securities firms. Air China Ltd. is now the world's biggest airline by market value, outranking Singapore Airlines Ltd. and Deutsche Lufthansa AG.

China's new giants are now setting their sights on overseas acquisitions as they put to use cash raised from stock sales.

Citic Securities said Oct. 22 it will pay $1 billion for the equivalent of 6 percent of New York-based Bear Stearns Cos.' shares, which is reeling from mortgage-related losses. The U.S. brokerage is investing the same amount in Citic.

`Matter of Time'

ICBC, now the world's largest bank by market value, will set up branches in cities including New York and Moscow and make acquisitions to speed up its overseas expansion, Chairman Jiang Jianqing said in an interview on Oct. 17.

More global acquisitions by Chinese companies are likely, said Mark Mobius, who oversees $45 billion at Templeton Asset Management Ltd. in Singapore.

``This has already been happening and it's just a matter of time until we see the trend accelerate further,'' he said.

While Chinese companies have made strides in terms of market size, only China Petroleum and Chemical, or Sinopec, and PetroChina are among the world's biggest 50 companies by revenue.

PetroChina, the nation's largest oil company, passed General Electric Co. on Oct. 15 to become the world's second-biggest company, behind Exxon Mobil. PetroChina on Aug. 23 reported first-half net income rose 1.4 percent to a record 81.83 billion yuan ($10.9 billion). It is the world's 44th biggest company in terms of sales, according to Bloomberg data.

`Too Expensive'

China's CSI 300 benchmark is valued at 43 times estimated earnings, compared with the average 29 times for Chinese companies on the Hang Seng China Enterprises Index, according to data compiled by Bloomberg. In the U.S., home to the world's biggest stock market, the S&P 500 Index is valued at 16.5 times.

``Chinese companies are far too expensive from any rational measure,'' said Fraser Howie, co-author of the book ``Privatizing China: The Stock Markets and Their Role in Corporate Reform,'' in Singapore. ``It's a bubble and in a bubble things are priced wrongly.''

Investors pay 78 times estimated full-year profit for China Life in Shanghai and 42 times in Hong Kong, according to Bloomberg data. That compares to 9.4 times for New-York-based American International Group Inc., the biggest U.S. insurer, and 8.4 times for Europe's largest, Munich-based Allianz SE.

China Life said in August first-half profit more than doubled to 23.3 billion yuan, on soaring returns from the stock market. Its shares have almost quadrupled in Shanghai since they started trading there on Jan. 9 and are up 96 percent in Hong Kong this year.

`One Big Bubble'

Chinese investors opened about 49 million trading accounts this year alone, nine times the total for 2006. Total accounts in China have swelled to 127.8 million. In the U.S., brokerages manage more than 83 million accounts, according to 2006 statistics from the Securities Industry and Financial Markets Association.

``It's pretty unnerving,'' said Leslie Phang, who helps manage $1 billion at Commonwealth Private Bank in Singapore. ``It's all building into one big bubble. The Chinese companies are trading on euphoria.''

Gross domestic product in China rose 11.5 percent from a year earlier in the third quarter. Inflation surged to a 10-year high of 6.5 percent in August and was at 6.2 percent in September. That's more than double the central bank's annual target of 3 percent and higher than the key one-year deposit rate of 3.87 percent, encouraging speculation in stocks.

`More Rational'

The China Securities Regulatory Commission must protect investors and prevent market risks, Vice Chairman Tu Guangshao said at the Communist Party congress in Beijing on Oct. 16. Investors should be ``more rational'' since ``the higher the share prices, the greater the risk,'' Chairman Shang Fulin said.

The rise of China's companies has drawn comparisons to the ascent of Japanese firms during its stock market bubble two decades ago.

``Japanese companies in the late 1980s traded at similar P/E multiples to Chinese companies today,'' said Elan Cohen, a Singapore-based portfolio manager at JPMorgan Private Bank, which has $350 billion in assets. ``The parallels end there. Japanese companies' earnings growth in the 1980's was anemic, whereas Chinese companies' earnings growth today is astronomical.''

Marc Faber, who manages $300 million at Marc Faber Ltd. in Hong Kong and who told clients to sell stocks one week before the 1987 Black Monday stock market crash, said it may only be a matter of time before some of China's biggest companies become household names throughout the world.

``European countries were also surprised at the beginning of the 20th century when American companies overtook European companies,'' he said. ``The world better get used to it.''

To contact the reporter on this story: Chua Kong Ho in Singapore at kchua6@bloomberg.net

Last Updated: October 29, 2007 10:03 EDT