PetroChina, Sinopec Surge on Industry Merger Speculation

PetroChina Co. and China Petroleum & Chemical Corp., the nation’s two largest oil explorers, jumped by their daily trading limit in Shanghai on Monday on speculation the government is considering consolidating the industry.

“Big oil names are soaring because of speculation that the government is studying mergers in the industry,” said Clement Cheng, an equity trader at RBC Investment Management Asia in Hong Kong. “The oil sector has been undervalued for a long time.”

PetroChina jumped 10 percent to 14.65 yuan, the highest in more than five years, and China Petroleum, or Sinopec, also rose 10 percent to 8.56 yuan at the close in Shanghai. The Shanghai Composite Index climbed 3 percent to 4,527.396.

Separately, the Economic Information Daily reported Monday that China’s state-assets regulator may cut the number of government-owned enterprises to 40 from 112 through mergers and restructuring. The report, which didn’t specifically mention Sinopec or PetroChina, cited people it didn’t identify.

China National Petroleum Corp., the state-owned parent of PetroChina, hasn’t received any information from the government, nor has it spoken with Sinopec about a merger, Media Director Gong Kai said. A Beijing-based Sinopec spokesman couldn’t be reached for comment.

A merger of the two Chinese oil explorers goes against China’s own policy of allowing markets to play a greater role in the allocation of resources, Bloomberg Intelligence analyst Grace Lee said.

“A merger of the two will only create more monopoly, not less,” she said. “I don’t see it helping with overseas acquisitions in any way, as a bigger company will certainly invite more antitrust concerns.”

PetroChina will announce first-quarter earnings Monday. Profit may drop 71 percent to 9.98 billion yuan, based on the average of three analyst estimates compiled by Bloomberg. Sinopec may post a 1.88 billion yuan first-quarter loss later this week, compared with a 13.5 billion yuan profit a year ago.

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