China's stock mania intensified Tuesday as Alibaba.com Ltd., operator of the country's largest online trading site for companies, almost tripled on its first day after an initial public offering in Hong Kong.
The frenzy for the stock pushed the price to a level that made it four times more expensive than Google Inc. relative to earnings.
The Alibaba offering followed the Shanghai debut of PetroChina Co. on Monday. Chinese investors were so ravenous for PetroChina's shares that the company's stock market value ballooned to $1.1 trillion -- making it the first company ever to be worth more than $1 trillion.
Alibaba's shares ended at 39.50 Hong Kong dollars, up from their offering price of 13.50. That gave Hangzhou-based Alibaba a market value of $25.7 billion, closing in on Yahoo Japan Corp. as Asia's biggest Internet company.
At the final price for the day, Alibaba traded at 155 times next year's estimated earnings per share. By contrast, Google shares trade at about 36 times estimated 2008 earnings.
"It's a high valuation, but if Alibaba can use its leadership position in the e-commerce market to get more Chinese businesses to pay for its services, it will justify it," said Rafe Xu, an analyst at Sinopac Securities Asia Ltd. in Shanghai.
Alibaba, founded nine years ago by a former English teacher with $60,000, predicts profit will almost triple this year on rising online trades in the world's fastest-growing major economy.
In the quarter that ended June 30, Alibaba accounted for 43% of total transactions in the so-called business-to-business e-commerce market in China, more than triple its nearest rival, Global Sources Ltd., according to Analysys International.
Clients can advertise or buy products using Alibaba's website free. The firm charges suppliers from China and Hong Kong an annual fee to become so-called premium members, which enables them to gain preferential access to buyers.
At the end of June, China was home to 162 million Internet users, second to the U.S., according to the government-backed China Network Information Center. The nation may surpass the U.S. next year, according to research firm BDA China Ltd.
"The market size is huge," said Alibaba Chief Executive David Wei. There are more than 42 million small and medium-sized businesses in China, all potential clients, he said.
Unlike some other Chinese Internet-related companies, such as Baidu.com Inc., Alibaba doesn't have U.S.-traded shares.
Demand was so massive in Hong Kong that the company didn't miss out by skipping the U.S. market, analysts said.
Hong Kong investors ordered about 257 times the amount of Alibaba stock available to them. The company raised $1.5 billion in the offering.
"Orders were just stuck in the system waiting for execution," said Andrew Sullivan, head of Asian sales trading at Daiwa Securities SMBC Co. "You're only talking about delays of about 10 to 15 seconds, but when something's trading and moving quickly like Alibaba, it makes a difference for the client."