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1. Tien will urge Exco to freeze land sales

2. Li `didn't change view on bridge'

3. Cheung Kong to tempt owners of HOS flats

4. Land sale likely to raise $345m

5. Donald Tsang joins bridge backers

6. Sir Gordon's comments upset Li Ka-shing, says Canning Fok

7. Fall in complaints over building industry graft

8. Top officials face testing time with completion of penny-stocks probe

9. Bamboo weakness worries builders

10. Hacker warns of new viruses

11. Penny stocks row probe unlikely to lay blame

12. Small developers test market sentiment in twin offerings

13. Property bubble building up steam

14. China at forefront of Linux drive

1. Tien will urge Exco to freeze land sales
by Staff reporter, The Standard Sep 9, 2002

Executive Councillor James Tien is to propose in an Exco meeting that the government stop selling land and subsidised flats until the property market stabilises, in an attempt to ``rescue'' the debt-ridden middle class.

According to budget documents, halting land sales this fiscal year would cost the government HK25.6 billion in revenues.

Tien noted the middle class - the mainstay of Hong Kong's economy - is reluctant to spend due to their shrinking salaries and assets, resulting in the economy and the service industry becoming more sluggish.

To turn the economy around, he believes the government needs to ``rescue'' the middle class and boost their confidence in the economy.

In an exclusive interview with the Sing Tao Group yesterday, the Liberal Party chairman said he would propose that the government stop selling land and Home Ownership Scheme flats until the market stabilises. He would also ask the government to liaise with the MTRC, KCRC and Urban Renewal Authority to halt flat supply.

``When the government sells land after the market absorbs all the flats, it'll receive higher income. But in the short term it's inevitable that the deficit will soar,'' Tien said, admitting that the government may lose HK$20 billion to HK$30 billion in income.
But Tien believed the move would benefit Hong Kong in the long run.

``Does the government want to see the economy keep going downhill with land being sold cheap or does it want to see the property market rise steadily, resulting in a boost of confidence among the 1.5 million middle class so that they are willing to spend more, spurring the economy?'' he asked.

The businesses of most middle class people, especially professionals such as architects, accountants and lawyers, would only turn for the better if the property market improved, he said.

``Society's earnings and spending all hinge on this group of people,'' Tien said. ``If the middle class is financially unstable, they'll take less taxis and go out less for meals.''

Tien said that under a free economic policy and with huge deficits, it was difficult for the government to assist the middle class with tax incentives, but stopping the land sales and HOS flats supply could at least prevent them from further losses.

``Cutting back on land supply will naturally help the market, while the stagnant secondary property market will also revive,'' he said. ``Then the government will receive more stamp duty while the businesses of the middle class will be boosted.''

On suggestions that the government should provide tax breaks or free land premiums to lure small and medium enterprises back to Hong Kong, Tien said he doubted the idea was viable.

He agreed with Secretary for Commerce, Industry and Technology Henry Tang's proposal that those who invest in research and development could be given double tax concessions as encouragements.

2. Li `didn't change view on bridge'
by Michael Ng, The Standard Sep 9, 2002

The war of words among tycoons over the proposed Hong Kong-Macau-Zhuhai bridge took a new twist yesterday with Hutchison Whampoa denying that chairman Li Ka-shing had changed his mind on the issue.

Managing director Canning Fok also insisted the group had never opposed the bridge's construction by private companies - just the government subsidising it by free land, as was once proposed.

Rejecting suggestions by prominent bridge supporter Gordon Wu that Li had altered his stance from support to opposition, Fok told a news conference: ``Chairman Li feels very regretful and sorry over the dispute.'' Despite what Wu had said on Saturday, Li had not declared his support for construction of the bridge in 1983, Fok said. ``Wu and Li did not conduct any discussions or meetings over the construction of the bridge in the 1980s,'' he said. They had talked about it once in the 1990s, but he did not remember the exact date.

On that occasion, ``Wu brought a map to our former headquarters in the China building and discussed the construction of the bridge with Li. I clearly remember Li rejected his proposal as it was unsuitable for us,'' he said.

Fok said the rejection was based on business reasons and the likely profit return from the project was ``not interesting''.

He also took issue with Wu's suggestion that Li had changed his stance on the bridge proposal after a ``young team'' came to power at Hutchison.

``Staff in Hutchison Whampoa are all very energetic, all our staff belong to that `young team','' he said. ``The leader of the team is always Mr Li.''

Fok said that if private investors were willing to pay for the construction of the bridge, ``it's a very good thing''. ``But if free container port land was used to subsidise the bridge, we would oppose this,'' he said. ``It would sacrifice the interests of the local container port industry and severely affect local investment mechanisms and be unfair to all private investors.''

Fok also stressed the bridge would not affect Hutchison Whampoa's container port interests in Hong Kong and Yantian.

``The bridge would not deal a blow to our business,'' he said. ``Instead, if it enlivened economic activities and investments in Zhuhai, it would also benefit our container terminals in Zhuhai and Gaolan.''

Wu said on Saturday he had known for a long time that Cheung Kong Holdings and Hutchison Whampoa opposed the bridge as it might affect their business interests in Yantian Container Port in Shenzhen.

He said that when he suggested the project to Li in 1983, Li had agreed with the idea, saying it could boost confidence in Hong Kong. Wu said he had also discussed it with Chief Executive Tung Chee-hwa, who had also declared his support.

3. Cheung Kong to tempt owners of HOS flats
by Staff reporters, The Standard Sep 9, 2002

Cheung Kong Property Development will this week unveil a discount plan to lure Home Ownership Scheme flat owners to buy units in Hampton Place, in West Kowloon.

Group executive director Justin Chiu said the proposal was aimed at HOS flat owners who had been in their flats for less than two years.

``The details will be unveiled this week,'' he said.

Flat owners who returned their properties to the Housing Authority would be given priority submitting registrations for the 16 internal sale flats at Hampton Place, he said.

Chiu also revealed that Cheung Kong was negotiating with a flat owners' association at a HOS estate on the feasibility of owners returning their flats to the Housing Authority en masse and moving into Cheung Kong's flats.

``Our negotiating is in the final stage and an agreement will be reached soon,'' Chiu said.

He refused to name the estate, saying only that it was in Kowloon and contained about 2,000 flats.

Market sources believe the estate is either Choi Ming Court in Tsueng Kwan O, or Lai Yan Court in Lai Chi Kok.

The developer tried to lure HOS homeowners with a similar package a month ago at its Banyan Garden project.

About 32,000 flat owners in 19 HOS housing estates, which have been inhabited for less than two years, are eligible to resell their flats to Housing Authority at the original selling price.

Cheung Kong is also studying ways to grant concessions to HOS flat owners who became ineligible for government housing loans after they returned their flats to the Housing Authority.

But Chiu said the concessions would only be endorsed after the flat owners' association had come up with a total number of flat owners who would take part in the proposal.

As only 308 flats in Hampton Place are allocated for internal sale, it was likely the first batch of 16 units launched for internal sale last week would all be reserved for HOS buyers, Chiu said.

The flats, including eight with a seaview and eight with a garden view, were launched for internal sale at an average price of HK$2,750 per square foot and HK$3,098 psf respectively.

Group sales manager David Wan said 176 registrations had been received by Saturday.

More than 2,200 applicants have registered for the internal sale of Sun Hung Kai Properties' Aegean Coast development in Tuen Mun.

Sun Hung Kai Properties Real Estate Agency general manager Eric Chow said yesterday the internal sale of 487 units would take place today.

Prices would be similar to those for public sale. Chow announced last week that the first batch of 24 units in Aegean Coast would be sold at an average price HK$2,388 psf.

Meanwhile, 60 flats at Summit Terrace in Tsuen Wan were sold at an average price of HK$2,500 psf on the first day of its public sale yesterday. The Nan Fung Development project earlier sold 70 units in an internal sale.

4. Land sale likely to raise $345m
by Staff reporters, The Standard Sep 9, 2002

A small attendance is expected at tomorrow's land sale - the third this financial year - which is expected to generate about HK$345 million for the government.

The two small plots of land, in Kowloon City and Aberdeen, are expected to attract mainly small or medium-sized developers, property analysts said.

The Kowloon City residential site, on Sa Po Road, measures 24,811 square feet, with a gross floor area (GFA) of 223,299 sq ft, and a plot ratio of 9. It is next to the Regal Kai Tak Hotel. Ricacorp Properties estimated the site could fetch HK$400 million, representing HK$1,800 psf.

Midland Surveyors, however, expected the site to sell for about HK$270 million, representing HK$1,209 psf.

Midland estimated the residential-commercial plot at 47 Shek Pai Wan Road, Aberdeen, with a site area of about 7,270 sq ft, and a GFA of 65,430 sq ft, would sell for HK$75 million, or HK$1,146 psf.

Ricacorp said it would fetch HK$73 million, or HK$1,068 psf.

The developer of the Aberdeen site will be responsible for the cost of clearing the staff quarters of a former fish market. Market watchers estimated the commercial-residential development on the Aberdeen site could be sold at about HK$3,500 psf.

Ricacorp Properties said: ``Most of the large developers have their eyes on future projects to be contracted out by the KCRC, the MTR Corporation and the Urban Renewal Authority. Their interest in this auction will, therefore, be reduced.''

In April, the government earned HK$2.97 billion from the sale of four sites in the keenest auction seen in recent years - more than the HK$2.7 billion it made from all its land sales in 2001-02.

5. Donald Tsang joins bridge backers
CHRIS YEUNG, SCMP September 9, 2002

Chief Secretary Donald Tsang Yam-kuen has given strong backing to the controversial proposal to build a bridge to Zhuhai and Macau - but says no decision could be made by Hong Kong alone.

Mr Tsang's comments come amid intense debate over the $15 billion project, and after Financial Secretary Antony Leung Kam-chung said he supported the project a fortnight ago.

The chief secretary told the South China Morning Post : "We really want to do this. Our position is always that there is a need to build the bridge in the long run.

"We also attach importance to research. We need to assess the need, and issues such as flow of traffic, economic return and modes of co-operation.

"We should also not forget that most of the waters [beneath the bridge] will be mainland waters. A decision to invest in the project cannot be solely decided by the Hong Kong people.

"The central government will have to make a decision. Guangdong, Zhuhai, Shenzhen and Macau all have a say on it. We want to do this. From our point of view, we are very clear. We really want to go ahead with it."

First proposed more than two decades ago, plans for a bridge connecting Hong Kong to Zhuhai via Macau came to prominence again recently after clashes between tycoon Sir Gordon Wu Ying-sheung, a strong advocate of the project, and group managing director of Hutchison Whampoa Canning Fok Kin-ning. Mr Fok has said the bridge is unnecessary for cargo purposes and should not receive public funding.

Chief Executive Tung Chee-hwa affirmed the need to strengthen links, including infrastructure, between Hong Kong and the Pearl River Delta region, but was non-committal on giving the bridge the go-ahead.

Tycoon Stanley Ho Hung-sun last week pledged a personal investment in the bridge. The plan gained further impetus on Friday when Sir Gordon said the Mass Transit Railway Corporation had expressed an interest.

Wheelock chairman Peter Woo Kwong-ching also said the bridge would be positive for the SAR economy - but the government should not subsidise its construction.

A source said intense lobbying by tycoons had stalled a decision on the project. "The central government has heard different views. They need time to study it and make a decision," the source said.

The source said the interests of Guangdong and local authorities would also have to be taken into consideration. Previously, transport officials were of the view that the bridge would not be needed until after 2020.

However, top officials now believe building the bridge would carry significant strategic importance for Hong Kong by tapping vast potential economic opportunities in the western part of the Pearl River Delta.

"It will also be a significant boost to confidence," said the source.

The source said a government feasibility study was nearing completion and hinted that intense discussion was under way behind the scenes with a view to making an early announcement of a decision to go ahead with the project.

The 29km bridge, which could also include a rail line, has three proposed landing points - near Chek Lap Kok, southern Lantau and Tuen Mun.

6. Sir Gordon's comments upset Li Ka-shing, says Canning Fok
BEN KWOK, SCMP September 9, 2002

Li Ka-shing was upset at comments last week by fellow tycoon Sir Gordon Wu that he had changed his mind about supporting the proposed bridge to Zhuhai, Hutchison Whampoa group managing director Canning Fok (right) said yesterday.

"He [Mr Li] thinks Mr Wu's comment is regrettable. He doesn't like it, and he feels quite bad about the whole situation," said Mr Fok, who was asked by his boss to clarify the matter. The comments were the latest in a series of clashes between Sir Gordon and Mr Fok over the project.

In a press briefing yesterday, Mr Fok said Mr Li had declined Sir Gordon's invitation to invest in the bridge in the 1990s. Sir Gordon said on Friday that Mr Li used to support the idea of the bridge, but changed his mind after the "young generation" rose to power within his business empire.

"The leader of this younger generation is still Mr Li himself," said Mr Fok. "I have no idea why Mr Wu said Mr Li has changed his mind on this."

Mr Fok also derided Sir Gordon's suggestion that shipping lines be allowed to operate berths at container terminals. "This is ignorant, and you can quote me on this," said Mr Fok.

Mr Fok said Sir Gordon's bridge proposal was not "interesting as an investment" and Hutchison Whampoa had no plans to invest in the project.

7. Fall in complaints over building industry graft
STELLA LEE, SCMP September 9, 2002

The number of corruption complaints against the construction industry has dropped - the first fall in the sector since the uncovering of a series of piling scandals over the past three years.

The Independent Commission Against Corruption received 137 complaints against the construction industry in the first seven months this year, 15 per cent down from the 162 cases in the same period last year.

The anti-corruption watchdog released the figures after the conclusion last week of two of the highest-profile cases involving short-piling work on Home Ownership Scheme buildings.

The fall reversed the rising trend over the past three years. In 1999 there were 183 complaints, 261 in 2000, and 296 last year.

The cases uncovered include the short-piling scandals at two HOS blocks - Yuen Chau Kok in Sha Tin and a residential project above Tung Chung MTR Station.

In the Yuen Chau Kok case, three people from a subcontractor company were jailed for up to 12 years last Tuesday after being found guilty of conspiracy to defraud the Housing Authority in 1998.

Twenty-one of the 36 piles in two of the blocks concerned were found to have been shortened by two to 15 metres, while 11 rested on soft mud instead of bedrock. Only four were the length specified in the contract. The two blocks were demolished in 2000 at a cost of $542 million.

In the Tung Chung case, an engineer responsible for supervising the foundations for the site in 1997 was jailed last Friday for three years and nine months for covering up a defective pile site after receiving free trips and entertainment from subcontractors.

Three former staff from the main contractor were jailed in 2000 for between two and five years. Investigators later found 72 of the 76 piles at the site to be defective.

ICAC senior investigator Arthur Leung Kai-wing said cover-ups used in short-piling scandals included shortening tape measures, using false concrete dockets and submitting false construction records.

Acting group head of the ICAC's Corruption Prevention Department, Mok Wah-hoi, said lax supervision and inappropriate contact between construction site supervisors and contractors were among the common corruption problems in the industry.

But the ICAC's programme co-ordinator, Helen Lee Ching Po-han, said it had noticed a gradual improvement in the industry after educational talks had been stepped up at construction sites over the past two years.

stella.fylee@scmp.com

8. Top officials face testing time with completion of penny-stocks probe
ANGELA LI, SCMP September 9, 2002

Two senior officials face the first major test under the new accountability system with the completion this week of the investigation report into the chaos sparked by the proposal to delist penny stocks.

Lee Cheuk-yan, of the Confederation of Trade Unions, said: "What we worry about most is that the two-man panel appointed by Financial Secretary Antony Leung Kam-chung to conduct the probe will be siding with him." Mr Lee added that he hoped the report would spell out in clear terms who should be held accountable for the stocks controversy and recommend appropriate action.

Of particular concern is how far Mr Leung and Secretary for Financial Services and the Treasury Frederick Ma Si-hang should be held politically responsible for the fiasco, he said. Two other key players involved are Hong Kong Exchanges and Clearing chief executive Kwong Ki-chi and Securities and Futures Commission chairman Andrew Sheng.

Last week, Mr Ma urged the media to wait for the release of the report, which is due to be submitted to Mr Leung tomorrow. The investigation panel, comprising former stock exchange council member Gordon Kwong Chi-keung and barrister Robert Kotewall, has been reviewing the roles of government officials and regulators involved.

The investigation was ordered after investors dumped more than 200 penny stocks on July 26, a day after Hong Kong Exchanges and Clearing issued a consultation paper suggesting 11 criteria for delisting poorly-performing companies. This includes the controversial suggestion that firms trading below 50 cents for 30 consecutive days should be delisted. The plan was put on hold four days later, when the government intervened.

Democrat Fred Li Wah-ming expects the report to give a full account of what has happened, apportion responsibilities to each of the key parties involved and suggest measures for improvement.

"If the report contains no substance at all and is accepted by Chief Executive Tung Chee-hwa, the Democratic Party would study whether the legislature should set up a select committee of inquiry to look into the issue," he said.

Unionist Mr Lee said he would call for a Legco select committee of inquiry to be set up if he found the information contained in the report to be too vague. Alternatively, he might move a motion in Legco condemning the relevant officials should the report fail to state clearly who should be held accountable and the sanctions to be imposed.

Both Mr Lee and Chan Kam-lam of the Democratic Alliance for Betterment of Hong Kong hoped the report would establish whether there had been any market manipulation.

9. Bamboo weakness worries builders
FELIX CHAN, SCMP September 9, 2002

Building contractors have been urged to comply strictly with safety guidelines on bamboo scaffolding after a study found the material's strength lessened with time and in high humidity.

The Occupational Safety and Health Council commissioned the two-year study to improve the safety and reliability of the centuries-old construction method.

The study, conducted by the Hong Kong University of Science and Technology, found the quality of commonly used bamboo, such as its compressive strength, varied greatly.

It showed bamboo deteriorated in quality as humidity increased, while a 12-week ageing test revealed bamboo strength also diminished given time.

Tests involving the impact of dropping 40kg and 60kg sandbags showed fracture damage.

Study researcher and civil engineering lecturer Dr Chang Chih-chen said: "The most important point is that the strength of bamboo would weaken due to the climate and the passage of time. Hence, frequent inspections are necessary."

He concluded that bamboo scaffold intersections were not suitable anchorages for worker's safety belts.

"To ensure the safety of workers, it might be necessary to attach the safety belt to a stronger or permanent structure," he said.

Dr Chang suggested that further detailed study of the safety and reliability of scaffolding under strong wind conditions was needed.

The council's chairman, Ng Tat-lun, said fatal construction accidents often were caused by the failure to follow proper procedures.

Between 1994 and 1998, 31 fatal accidents related to bamboo scaffolding were reported.
The Labour Department issued guidelines last year advising that bamboo scaffolding needed to be inspected every two weeks.

felix.chan@scmp.com

10. Hacker warns of new viruses
ANH-THU PHAN, SCMP September 9, 2002

Hong Kong systems administrators were warned yesterday to implement stronger security measures and prepare for a new generation of viruses and automated hacking tools.

A United States-based hacker known as Rain Forest Puppy, or RFP, was speaking yesterday on the final day of Hack 2002, a security conference held at the Hong Kong Convention Centre.

He demonstrated in about half an hour how he used a Web browser to hack into a corporate Web site. For the demonstration, he used software employed by a US medical college to allow patients to access their own records over the Internet, although the site he hacked was one built specifically for the demonstration.

The key to averting such attacks was to devote more time to preventive measures, preferably before vulnerabilities are publicised by researchers or vendors, he said.

"From the most secure thing on the Internet to complete trash, it can happen overnight. Overly paranoid security configurations can actually help you more than patches," he said.

His suggestions include reducing the amount of information put into Web page headers and error messages.

Microsoft's Internet Information Server (IIS) Web server was labelled by RFP as being highly vulnerable to attack, although he added the open source Apache Web server has its own flaws, especially if used with its default configuration.

"There's only 10 [software modules] you need to make the server work. It comes with 30, you only need 10," he said.

Code Red, one of last year's most damaging viruses, attacked a long-known vulnerability in the IIS server, and administrators who had already changed the program had no problems.

"The only people who had problems were lazy admins," he said.

Security programs such as Bastille and Titan could help automate the process of turning off unneeded functions, he said.

Other software, such as ITS4, Flawfinder, Rats and FrontEnd Plus can look for security flaws in C++, Python, Perl, PHP and Java code. Many of these programs are available for free over the Internet. But administrators must manually review every potential flaw. "At least it makes you aware of what could be a problem," RFP said.

Foundstone chief information officer Gary Bahadur said the increased use of code reviews, especially by financial companies, was encouraging. "We're doing more and more although I don't think it's anywhere near where it should be."

Both speakers recommended testing sites on proxy servers before giving them to a company's Web server.

RFP said he was concerned about the silence of well-known hackers since late last year and the relative lack of Code Red-style attacks. "It's all really scary. The good attackers are going underground now. They're not even sharing anymore."

The silence could mean the next major attack will take administrators by surprise, in its seriousness and techniques.

He saw the potential for more automated attacks and for the time between a vulnerability report and the production of a virus that exploits it to shorten.

This lag-time has become as little as three days. "I foresee that being 24 hours, so having proper patching procedures and having proper response systems is crucial," he said.

So far this year, the most active viruses on the Web have been the Klez and Frethem families of viruses, which are prolific but carry relatively weak payloads.

Professional Information Security Association chairman Leung Siu-cheong said the biggest problem in Hong Kong so far this year had been the Klez virus, which forwards itself by choosing e-mail addresses at random from infected computers.

This disguises the origin of the viruses and means many infected users never realise their machines have the virus. "Klez is a special kind of virus. It is not very damaging but it is very intelligent in exploiting the weakness of humans," Mr Leung said.

He expected that as China established more business and communications links with the rest of the world, computer viruses from there would become a problem in Hong Kong and other places. "Now China is an importer of viruses. In the future they may be an exporter," he said.

anhthu.phan@scmp.com

11. Penny stocks row probe unlikely to lay blame
ENOCH YIU, SCMP September 9, 2002

A report into last month's wild trading in penny stocks is unlikely to blame key participants in the saga and will offer only suggestions on how the proposal to de-list stocks can be handled.

The results of the two-man investigation will be submitted to the financial secretary tomorrow and it is understood its findings will not allocate blame or recommend resignations.

Brokers believe the panel will suggest the exchange backs off its proposal to base delisting on share prices and may recommend an over-the-counter market to trade the delisted companies' shares.

A spokesman for the financial secretary said: "It is not expected the panel report will focus on chasing who should take the responsibility for the incident."

He said the two-member panel would focus on finding out what went wrong in the delisting consultation process that led to the penny stock fiasco on July 26.

It will also focus on improving consultation to help re-write the exchange's consultation paper to be released next month.

The spokesman said the financial secretary would like to release the report soon after receiving it tomorrow.

Chan Kam-lam, financial affairs spokesman for the Democratic Alliance for Betterment of Hong Kong said: "If the report's findings show any government officials or regulators have done anything wrong, then the persons should be penalised." Mr Chan also urged the SFC to release results of its investigation into whether there was market manipulation.
An SFC spokesman refused to comment.

The investigation came after investors dumped shares in more than 200 penny stocks on July 26, a day after Hong Kong Exchanges and Clearing issued a consultation paper providing 11 criteria for delisting poorly-performing companies, including those trading below 50 HK cents for 30 consecutive days.

Although the panel may not blame any individual officials, it would give a detailed report on their roles in the affair.

Those who have been investigated by the two-member panel told Business Post they were asked detailed questions on the decision-making processes of all participants involved.

Financial Secretary Antony Leung Kam-chung, Secretary for Financial Services and the Treasury Frederick Ma Si-hang, and permanent secretary for the bureau Tony Miller, have all had face-to-face interviews with the panel, a government source said.

It also included HKEx chief executive Kwong Ki-chi, SFC chairman Andrew Sheng and their assistants, the source said.

A spokesman for the financial secretary said Mr Leung had been interviewed by the investigating panel and submitted all information it requested.
The brokerage industry's four representative bodies have also asked to give a written response.

Hong Kong Securities and Futures Staff Union president David Wong Kwok-on said he expected the panel to urge the HKEx to abandon its delisting proposal on the basis of share performance.

"The investors dumped the penny stocks mainly because of the 50 cents delisting threshold. "The exchange should only delist companies with few assets but it should not delist firms only because their share prices are low," Mr Wong said.

He said the HKEx last week started to invite brokers to suggest how the delisting proposals, to be released next month, should be re-worked.

A government source added that the panel was likely to consider whether it should recommend changes to the current three-tier regulatory system for the market.

12. Small developers test market sentiment in twin offerings
SOPHIA WONG, SCMP September 9, 2002

Tomorrow's auction of two small residential sites is expected to fetch between HK$365 million and HK$406 million. Despite their size, some analysts said the sale would serve as the latest test of confidence, especially for small to medium-size developers.

Big developers are unlikely to compete for small lots, leaving mid-size developers to take charge in the third government auction this financial year. Developers and surveyors generally anticipated slow and cautious bidding due to the unfavourable market conditions.

On the block are a 24,811 square foot site in Kowloon City's Sa Po Road, and 7,270 sq ft on Shek Pai Wan Road, Aberdeen.

Surveyors predict the Sa Po Road site, with a developable floor area of 223,299 sq ft, will fetch between HK$290 million and HK$310 million.

Predictions for the other site range between HK$75 million and HK$96 million. A pure residential development on the site will produce a total floor area of just 65,430 sq ft. But analysts expected the successful bidder to build shops on the lower levels, which could raise the total floor area to about 70,000 sq ft.

New World Development senior development manager Andrew Choi Fook-ming said the two sites were too small for keen bids.

The Kowloon City plot was comparatively attractive and he estimated it would fetch an average price of HK$1,400 to HK$1,500 per square foot while the other site could be worth HK$1,200 to HK$1,300 per square foot.

Hon Kwok Land Investment managing director Herman Fung Man-hei and Tai Cheung Holdings chairman David Chan Pun were not interested in bidding because mass residential development was more risky.

But Mr Fung would attend the auction to see how the market responds.

However, Hong Kong Resort development and marketing general manager Chan Chi-ming said parent HKR International was interested in the Kowloon City site, given its location with open view and medium development capacity. He expected many developers would compete for the site.

Vigers Hong Kong anticipated the auction could fetch up to HK$365 million. It expected the Kowloon City site to sell for HK$290 million, representing an accommodation value of about HK$1,300 per square foot.

The Aberdeen site could be sold for HK$75 million. Assuming a plot ratio of 9.4 times, the site could be developed into a 68,338 sq ft residential project, and his estimate would represent an accommodation value of HK$1,097 per square foot.

Research manager Albert Lam said the scale of both developments were relatively small and were not in prime urban areas, and so the auction results should not be taken as a prime market indicator.

In April, the first land auction this financial year generated HK$2.97 billion from the sale of four sites in West Kowloon, Kowloon Tong, Sha Tin and Stanley. At the June auction, two small residential sites, including the North Point lot bought by Nan Fung, sold for a total of HK$422 million.

13. Property bubble building up steam
REUTERS, SCMP September 9, 2002

A graph of the country's property prices is akin to the famous Nike swoosh, only much steeper.

The latest data shows average house prices surged 19 per cent in the year to the end of June - the highest annual increase in 13 years and defying repeated predictions of a slowdown.

They jumped 4.9 per cent in the June quarter and have risen 62 per cent in the past five years, double the pace of growth in the United States.

AMP Henderson Global Investors economist Shane Oliver said: "Australia ranks at the top in terms of price gains during the past year.

"Relative to income and wealth levels, Australian housing is amongst the most expensive in the world."

Prices had risen at a similar rate to those in Britain, where values rose 18.8 per cent in the year to last month. Spain had seen property prices rise 16 per cent and Canada 10 per cent, Mr Oliver said.

The price rise has been fuelled by the lowest lending rates in 30 years, a government grant for first-time buyers and investors seeking an alternative to a poorly performing stock market.

The central bank has expressed concern at the sharp rise and economists have warned of a bubble market waiting to burst.

Commonwealth Bank chief economist Michael Blythe said: "Rising house prices and the fact that most other investment destinations look decidedly unattractive is helping keep alive investor interest in the housing market."

Expatriate Australians earning US dollars or British pounds have been keen house buyers, cashing in an 18 per cent decline in the Australian dollar since 2000.
Some home-owners in Sydney, the most expensive real estate market, have become millionaires as their homes increased in value.

In some suburbs, even small cottages originally built for workers more than 100 years ago can fetch A$1 million (about HK$4.24 million). Prices in Melbourne, the country's second-largest city, have doubled in five years and rose 7.7 per cent in the June quarter.
Australia is not alone in Asia in experiencing surging home costs. South Korean President Kim Dae-jung called for action after seoul apartment prices jumped 24 per cent in the first half.

However, economists say the price rises in Australia, whose economy has been one of the best performing in the world during the past year, are not sustainable.
TD Securities economist Stephen Koukoulas said: "Too many dwellings are being built for the population growth."

Gerry van Wyngen & Associates principal Gerry van Wyngen said that by measuring the price of houses against annual national average income, Australian property is the most expensive in the world. The measure is 20 per cent above Japan, Britain and Germany.

AMP's Mr Oliver said housing wealth represented 400 per cent of an Australian household's disposable income, compared with 180 per cent in the United States and 318 per cent in Britain. Rental vacancy rates have increased and profits from housing rentals are the lowest in 40 years.

The Reserve Bank of Australia noted in a recent commentary: "Rents have not kept pace with price gains."

Governor Ian Macfarlane raised "some doubts about the prospects for returns on this type of investment over the next several years".

The latest figures have reinforced the view prices can not continue at such a heady pace.

Mr Oliver said: "The longer the house-price bubble goes on the greater the downside for when it eventually bursts."

14. China at forefront of Linux drive
DANYLL WILLS, SCMP September 9, 2002

Asia will eventually become the world's most important Linux market, with China moving quicker than anybody else in the region, according to Shintaro Nezuka, IBM's Asia-Pacific director of Linux sales and marketing.

Mr Nezuka was in Beijing to talk about IBM's Linux initiatives for the region.
"Of all the nations in this part of the region - China, Japan and South Korea - China is the most aggressive when it comes to Linux adoption," he said.

One reason for this was that China's economy was growing and there was government support. His own country, Japan, could continue to generate more revenue, but China would grow faster and adopt faster, he said.

"The Japanese are extremely cautious when it comes to new things, particularly in technology," Mr Nezuka said.

One reason for the strength of Linux in the region was that it was less political here. In the United States, where Linux is dominated by many programmers who are almost obsessive about open source, the movement is somewhat political.

The Free Software Foundation was begun by Richard Stallman, a vociferous advocate of free software and the GPL (Gnu Public Licence). There was unlikely to be a similar advocate in Asia, Mr Nezuka said.

Although IBM would never violate the GPL, it does believe that open source and proprietary software can co-exist. Indeed, Mr Nezuka thinks they can do more.

"We educate our customers. Everyone must be educated about Linux. We show them that open source and proprietary software can be married. We must conform to the GPL, of course, but that does not prevent us from finding solutions that use both," he said.

This put IBM in a very good position because it could sell services to make it all work. Linux, Mr Nezuka said, had "come of age".

"Look at LinuxWorld. A few years ago it was dominated by guys with ponytails. Now you see more suits than ponytails."

Mr Nezuka described Linux as an irresistible trend. He gave a few examples of trends that have become multi-billion-dollar businesses, including the personal computer and the networking protocol used by the Internet, TCP/IP (transmission control protocol/Internet protocol).

"You cannot buck the trend. People said the PC was a toy. They were wrong. Then they said TCP/IP was a toy. Even I said it was not a serious technology. I was wrong. Now they are saying grid computing is only for researchers. You will soon see that that is also wrong," he said.

What IBM hopes to bring to the Linux initiative is serious support and integration.

"Some of these customers do their IT [information technology] on their own. Some say: 'My core business is not IT,' so for them, they are saying they want something else.

This is an area where we can help. We would naturally like the customer to use everything we have, but we will work with all technologies to provide the customer with the solution that best fits him," Mr Nezuka said.

One problem with Linux is that it is not yet seen as a serious solutions-based platform. Some people are still just learning how to set it up and use it.

"Look at the magazines. They are still mainly about how to set up and use Linux. There are few articles about the value proposition or [total cost of ownership]. Reliability is another important element that does not get as much coverage as we should like. It is our job to introduce these things to customers," Mr Nezuka said.

IBM took great care in training its people to interact with the right people in the right way, he said.

"We have enjoyed a long relationship with the Fortune 500 and Fortune 1000 companies. We train our people in the language spoken by the people they must interact with. The [chief financial officer] talks numbers, the [chief information officer] talks technology and the [chief executive] talks business," he said.