NEW YORK – American companies are supplanting China from the world’s 500 biggest stocks faster than at any time in the past decade, as an improving U.S. economy and investor confidence in free markets overcome the lure of equities offering twice the profit growth.
U.S. corporations led by Apple and Exxon Mobil make up 171 of the top 500 with a market capitalization of $10.6 trillion, or 40.3 percent of the total, compared with 159 valued at $8.24 trillion in 2009, data compiled by Bloomberg show.
PetroChina and Industrial & Commercial Bank of China lead the 24 Chinese firms worth $1.74 trillion qualifying today, down from 34 with a capitalization of $2.19 trillion.
China’s share of the world’s biggest companies diminished even though its government-directed economy has continued to expand while the U.S. and Europe showed anemic growth during the past four years. While the Standard & Poor’s 500 Index doubled since reaching a 12-year low in March 2009, the Shanghai Composite Index fell 6.5 percent on concern state ownership of business means investors aren’t the first priority. Valuations for Chinese companies declined to half of those in the U.S.
The discount in valuation is reflective of not having very specific private-property laws in China, Wayne Lin, a money manager at Baltimore-based Legg Mason, said in a Nov. 27 phone interview. His firm oversees $646 billion. There’s no guarantee that what the company owns, the company will be able to keep in the long run. The U.S. is in a better position.
The S&P 500 rose 0.5 percent the last week in November as U.S. leaders prepared to negotiate a budget deal, extending the 2012 gain to 13 percent. The Shanghai index slumped 2.3 percent, touching the lowest level since 2009, amid concern the nation is poised for the worst economic slowdown in a more than a decade. The Chinese equity benchmark is down 10 percent, heading for its third annual loss.
Economic expansion that was three times faster in China failed to keep America’s proportion among the biggest companies from expanding as investors sought the relative safety of U.S. stocks. While the world’s most populous country boosted gross domestic product by 62 percent from 2009 to 2011 and passed Japan to become the No. 2 economy, its share of the top 500 fell to 6.6 percent from 9.3 percent, the biggest drop since Bloomberg data began in 2002.
Earnings from the largest companies in China increased by sevenfold on average over the past three years, more than double the rate for American corporations, according to data compiled by Bloomberg.
Faster growth isn’t being rewarded as the combined value of mainland companies fell 9 percent since the end of 2009, compared with an advance of 31 percent for top American stocks. Chinese shares trade at 8.3 times reported earnings in the past 12 months, compared with 15 in the U.S., Bloomberg data show.
Chinese stocks fell after President Hu Jintao directed banks to lend to local governments during the global financial crisis and artificially low retail fuel prices hurt refiners.