Warren Buffett sells down PetroChina

On the face of it, it looks as if Mr Buffett's shareholders can rest assured that their guru has not gone soft. PetroChina, the biggest of China's oil and gas trio, has performed fabulously. Its Hong Kong-listed shares are up 29 per cent so far this year, and almost four times the level at which the UK's BP exited in 2004. Mr Buffet is selling shares at roughly seven times the amount he paid for them in April 2003 and quitting one of the world's priciest integrated oil and gas stocks, trading on around 16 times this year's consensus earnings. Superior production helps justify some premium but PetroChina's biggest earnings fillip - higher oil prices - also benefits the rest of the industry and in any case is not a given. Excitement over acquisitions may be overdone, since PetroChina is a $325bn goliath requiring a mega-deal to move the needle.

However, getting the fundamentals straight is a mere nicety in Chinese markets. There, PetroChina is a bargain. Hong Kong's "H" share index of Chinese entities is trading on a multiple of 28 times; in Shanghai - where PetroChina plans to raise some $5.3bn - the multiple is more than 50. If past trends are repeated, the "A" share listing will be priced to ensure a spectacular day one pop and "H" shares will surge in their wake. PetroChina's empire allows for plenty of decent newsflow and the group's $25bn capital expenditure should enable it to fill at least a few extra barrels. Mr Buffett was close to calling the bottom when he piled into PetroChina. Even if he has sold short of the top, the investment has been an outstanding one.