News Stories:

Click-on these handy "jump links" to quickly access the news item
you're looking for.

1. Penny for his thoughts

2. Monitor

3. Tycoons urged to forget war of words

4. Record high for SAR air pollution

5. New rules to combat labour disputes

6. Deficit may blow out to $74b, warns ING

7. Buyers snap up Aegean Coast apartments

1. Penny for his thoughts
ENOCH YIU, SCMP September 9, 2002

When Herbert Hui Ho-ming stepped down as head of the stock exchange's listing arm five years ago, the market presumed it was for bigger and better things - in other words, a huge retirement wad.

His first move was to Guangdong Investment. Mr Hui soon found himself up to his neck in heavy debt restructuring of the mainland government-backed insolvent enterprise.

A US$5.59 billion restructuring was finally completed in December 2000. Mr Hui does, however, put a positive spin on the experience: "This was cutting edge practical corporate governance experience.

"As far as I am concerned, the diligence of the independent directors carried the day."
He then moved to Sun Hung Kai Properties. More precisely, its e-business arm, Sunevision.

Then followed an implosion of the dotcom bubble. So Mr Hui went Old Economy.

He joined Ocean Grand Holdings a year ago to explore the world of aluminium extrusion project manufacturing and electroplating chemicals-making.

The choice was based on the view that "the market is ready for medium-sized companies which are lean and mean".

Ocean Grand has had steady growth. On Friday, it reported a 39 per cent increase in profit attributable to shareholders of HK$87 million.

The SME disciple lauds the benefits of size: "Small and medium-sized companies have the advantage of streamlined management and decision-making," he insists.

"However, many lack depth of expertise and in some cases this can result in tunnel vision in terms of strategic business direction."

Mr Hui nevertheless appears to have become an SME groupie. During his listing days, he was known for his tendency to play to the press gallery. Perhaps now it is the turn of the SME set in Hong Kong.

The penny stocks drama seems to be a case in point.

"On issues like this it is crucial for regulators to consult with SMEs and their investors extensively in order to have a better understanding of what drives these companies," he asserts.

Under his watch, he argues, the listing division had a tradition of working closely with public companies, regardless of size.

"The exchange should not only canvass the views of large corporations but should also seek the views of smaller companies, which represent a major source of Hong Kong's future growth and should be nurtured accordingly," he said.

SME's have a "crucial role" in Hong Kong's economic rebound, according to Mr Hui.
The collapse of Enron and WorldCom have shown that "size alone is not a determinant of corporate governance" and SMEs should be encouraged to appreciate the practical advantages of good governance.

"To be fair to the regulators, many SMEs do not appreciate the benefits of good corporate governance and having limited resources, do not see it as a priority," Mr Hui admits.

The Hong Kong Institute of Directors, of which Mr Hui is the deputy chairman, is currently focusing on promoting wider corporate governance among SMEs.
Yet much of the burden lies not in the rules per se but with "effective co-operation of three groups: regulators, market professionals and most importantly, company directors," he said.

"We need first-class regulators who understand what it takes to run a business, and to implement the rules sensibly."

He adds: "We need market professionals with the integrity to say 'no' to unacceptable corporate behaviour and we need the directors who are agents of change within their particular corporations in promoting high standards of corporate governance.

"The three groups must get to grips with the fact that they are in this together."
Better communication could be a start - Mr Hui feels a lack of it is at the heart of the penny stocks drama.

"When the exchange is considering any sensitive policy, even in preparation of consultation proposals, it is vital for exchange officials to talk to a wide range of market participants, particularly those likely to be affected by the proposals, to get their views," he said.

A report on the penny stocks by an investigation panel will be handed over to Financial Secretary Antony Leung tomorrow. The probe follows frenetic dumping of 200 penny stocks after Hong Kong Exchanges and Clearing suggested 11 delisting criteria, including the possibility of booting off companies trading below 50 cents for more than 30 days.

Mr Hui feels that communication could have avoided any panic.

"Delistings are necessary to keep the market healthy," he remarked. "However, proposals which resulted in otherwise-performing small companies losing their listing status would be detrimental to the market as a whole."

They would also create uncertainty "which would not only affect existing listed companies but would also influence companies considering seeking a listing on the Stock Exchange of Hong Kong," he said. "Hopefully the exchange will take care of the interests of both large and small companies in regulating the market."

Back in 1993, Mr Hui in fact dubbed delisting a last resort, noting with some satisfaction that no company had been booted off the exchange during his spell as listing head. Although offering no solution to the problem of proliferating under-performers, he does say he hopes a balance can be struck.

SMEs do have excellent prospects, after all. Large corporations face major growth constraints due to structural inefficiencies, he said.

"The regulators need to be able to gauge this paradigm shift and create an investment environment in tune with contemporary Hong Kong," he noted.

"Assuming they have a healthy business, companies of all sizes should be able to benefit from their listing status and be able to access funds through the market."

Especially SMEs: "Hong Kong has around 250,000 SMEs and with that sort of number, it must be worth the effort for the authorities to coordinate efforts to facilitate their growth and expansion."

2. Monitor
JAKE VAN DER KAMP, SCMP September 9, 2002

One key insight into why we should be on our guard about this consultancy proposal that we build at least two more cruise liner berths comes from consultant Scott Lagueux himself.

"After the Hong Kong Disney opens, Disney may want to link its park in Tokyo with the one in Hong Kong with cruise tours," he said last week.

You can just picture it. Let us say that Disney also gets what would no doubt be its dream location for such a terminal - right beside the Lantau Disney park. You would then have Disney patrons who would not even need a Hong Kong dollar in their pockets to spend a few days here.

Straight from the ship to the park and back to the ship they would go, eating imported foods, amusing themselves with foreign-themed entertainments and being served by migrant labour.

It would be a Disney tour, not a Hong Kong tour, and you would not need more than the fingers of one hand to count what they would leave in the Hong Kong economy itself, probably in cents even then.

In fact, even if the cruise terminal were located in the harbour they would not leave much here. A cruise operator is not stupid. If his passengers have money to spend he would prefer they spend it on the ship. That is why the meal pass comes with the ticket and all new cruise ships have extensive shopping malls.

It is the standard complaint of the impoverished Caribbean islands that these ships so heavily patronise. The big money boat comes and goes, keeping all of its money on board and the islanders remain poor.

Of course you cannot expect the operators to admit this proven fact of life about cruise tours. The study released last week claimed we would get economic benefits of $3.3 billion by 2010.

For "economic benefits" you can read "wool over your eyes". It is a very loose term and certainly does not mean money in your pockets. At best it means money in the pockets of the operators. Let us define this claim precisely. Bulls**t.

So the first question to ask in light of how little money cruise tours are known to leave at their stops is the obvious one. Who will pay for these new berths?

It is a question that was notable for its absence in the report we published yesterday on the consultancy study (Cruise bonanza may sail past HK). The headline actually says it all. The emphasis was on how cruise ships may go elsewhere unless we accommodate them, a whinge that tourism boosters regularly turn into a full opera.

Let us ask it anyway. If running a cruise terminal is such a money spinner our government would not need to put any money into it. All it would need to do is designate some land for it and let private sector operators bid for it.

Now I expect that this is what government will in fact do but I also expect it will grovel at the feet of the operators by granting that land almost for free or at a peppercorn rent. Massive giveaways of prime real estate have become a hallmark of the Tung Chee-hwa administration.

So spare a moment of pity for those people in the Treasury who have been trying to work out a consistent policy for the returns government should get from public concessions, only to be sandbagged every time by Mr Tung's henchmen.

I can guess what will happen. The tourism industry will scream in protest at any price for the land that is likely to meet even the minimum Treasury targets and it will get what it wants, a gift from the public coffers to the pockets of foreign cruise ship owners, all justified with bafflegab about nebulous social benefits and vaporous economic returns.
And you really thought, did you, that we had a chance of trimming our huge fiscal deficit?

Email Jake van der Kamp at jakeva@scmp.com.

3. Tycoons urged to forget war of words
STELLA LEE and FELIX CHAN, SCMP September 9, 2002

The war of words between Li Ka-shing and fellow tycoon Sir Gordon Wu Ying-sheung over the proposed Zhuhai bridge should be "forgiven and forgotten" in the best interests of Hong Kong, one of Sir Gordon's business lieutenants said yesterday.

Director of Hopewell Engineering and Construction Leo Leung Kwok-kee, who assists Sir Gordon in the planning of the $15 billion bridge to Zhuhai and Macau, said the discussion should not be sidetracked by a "meaningless issue".

"Let's all forgive and forget about the trivial misunderstanding and focus on the overall interest of Hong Kong," Mr Leung said. His comments came after Hutchison Whampoa group managing director Canning Fok Kin-ning said on Sunday that Mr Li was upset at comments last week by Sir Gordon that he had changed his mind about supporting the proposed bridge.

Mr Fok said that in the 1990s Mr Li declined an invitation to invest in the bridge from Sir Gordon - who raised the concept of linking Hong Kong and the western Pearl River Delta two decades ago.

Mr Fok said Mr Li's Hutchison Whampoa, a key port operator, found the proposal not "interesting as an investment".

Mr Leung yesterday said the bridge was important to Hong Kong's overall interests and needed to be completed in five years, or no later than the proposed link between Shenzhen and Zhuhai.

Hong Kong would be marginalised without such a connection with the Pearl River Delta region, he said.

Mr Leung said constructing the bridge would not only create employment when it was being built, but also help boost logistics and other businesses.

He said they were confident that the bridge would be given the green light. "What is needed is only endorsement from Beijing and Guangdong. We need their blessings to conduct a feasibility study and work out a proposal on the bridge among the three sides," Mr Leung said.

Chief Secretary Donald Tsang Yam-kuen has given strong backing to the proposed bridge, but added no decision could be made by Hong Kong alone, as Beijing, Guangdong, Zhuhai, Shenzhen and Macau all had a say in it.

Meanwhile, the China-Hong Kong Interactive Association, a cross-border policy think-tank, said such a bridge would benefit the long-term economic development of the Pearl River Delta region.

However, association chairman Fred Ip Kai-ming added: "Mr Wu's proposal will provide a good start, if realised, but building the bridge will only create 10,000 new jobs and we are not sure if most of them will be filled by Hong Kong workers."

4. Record high for SAR air pollution
MARY ANN BENITEZ, SCMP September 9, 2002

The general air pollution index reached a record high of 185 at the airport town of Tung Chung yesterday.

The reading came just two weeks after the API hit 181 on August 28 also in the airport town, located at the foot of a mountain where pollutants are trapped in still weather.

The Environmental Protection Department said the record was set at 3pm yesterday in Tung Chung. Most of the general stations recorded levels below 60 throughout the day. Yuen Long readings were between 60 and 80 in the afternoon. The previous highest reading of 174, recorded at the roadside in Central in March 2000, measured vehicle emission pollution. Roadside stations had readings of 80 to 100.

A spokesman for the department said ozone had accumulated due to the weather being fine and hot, with light winds in the past few days. "The winds became very calm again today. The sea breeze effect - winds coming from opposite directions across the territory due to differential heating of land and sea - in the afternoon resulted in convergence of air flow which further trapped the pollutants," he said.

When the reading reaches 100, people with heart and respiratory problems are advised to stay indoors and avoid physical exertion.

The Hong Kong and Guangdong governments have set targets for cutting emissions by 2010. A regional air quality management plan has yet to be drawn up.

5. New rules to combat labour disputes
FELIX CHAN, SCMP September 9, 2002

Tougher sub-contracting rules on government-funded projects might come into force this year to counter the rise in labour disputes.

Permanent Secretary for Environment, Transport and Works Lo Yiu-ching said yesterday the government would order public works contractors to submit bids with a list of their sub-contractors and the mechanism to monitor them.

"Too many sub-contracting levels will inevitably mean there are many non-productive parties in the middle acting like agents," he said, and this could lead to workers being deprived of their rightful wages.

Mr Lo also said winning contractors wanting to amend their lists of sub-contractors would have to seek government approval. However, no limit would be imposed on the levels of sub-contracting.

The stricter measures follow a rise in cases of sub-contractors defaulting on wages, often for work on government projects, with recent disputes turning violent.

In the last incident on July 19, a clash broke out at a Yau Tong public housing work site between police and 40 decorators demanding what they claimed was $10 million in unpaid wages from their sub-contractor employer.

The Labour Department has handled 5,300 cases of unpaid wages in the first seven months of this year, compared to 8,516 for the whole of last year.

Hong Kong Construction Industry Employees General Union chairman Choi Chun-wa welcomed the proposal and said the industry was already looking at ways to reduce the number of sub-contracting levels.

Hong Kong Construction Association president Wong Wing-ho also supported the new rules in principle but demanded flexibility in its implementation.

felix.chan@scmp.com

6. Deficit may blow out to $74b, warns ING
by Jonathan Tam, The Standard September 10, 2002

Hong Kong's deficit will probably swell to HK$74 billion this fiscal year because of the sluggish economy, prompting ratings agency Moody's Investor Services to downgrade the SAR's rating outlook within six months, ING Financial Markets has warned.

The Netherlands-based investment bank's chief economist, Tim Condon, said the economic downturn had crimped government revenue, thus making a larger-than-expected deficit in the first four months of the 2002-03 fiscal year.

``The growth slowdown highlights the government's fiscal troubles,'' Condon said.

``Government spending was on track, but revenue fell short.''

The government warned earlier this year that the current deficit trend would empty its reserves by the end of March 2009, and by 2021-22 Hong Kong's fiscal debt could be as high as HK$2.66 trillion, equal to 81.8 per cent of gross domestic product.

The deficit reached HK$40.1 billion from April to July - 89 per cent of its full-year projection of HK$45.2 billion. The economy grew 0.5 per cent in the second quarter while fiscal reserves stood at HK$332.4 billion on July 31. ING cut its Hong Kong growth forecast to 2per cent from 3.6 per cent for the year, but still higher than the government's projection of 1.5 per cent.

Apart from the slow economic growth, Condon said the government was likely to gain less than expected from the sale of an MTR Corporation stake and the civil service pay cut.

In March, the government said it expected to pocket HK$15 billion from the sale of an MTRC stake and save HK$6 billion from an assumed 4.75 per cent civil service pay cut, which turned out to range from 1.58 per cent to 4.42 per cent.

``Market conditions are likely to preclude the sale of MTR Corp shares for the second straight year,'' Condon said. ``And the actual cut in civil service outlays was only 50 per cent of the budgeted amount, which implies HK$3 billion in extra spending.''

Condon warned that if government revenue kept falling in line with the current trend, or there was shortfall of HK$11 billion in the last four months of the year, the deficit would reach HK$97 billion, or 7.6 per cent of GDP.

He said that the government should spur growth through profits and salaries tax cuts and by accelerating integration with China instead of tightening public spending.

``We continue to believe the government's approach to dealing with the fiscal deficit will make matters worse,'' Condon said. ``Contradictory fiscal policies in a slow-growing deflationary economy helped lead Argentina to ruin.''

Condon expected Moody's to downgrade Hong Kong's rating outlook from positive to stable in six months because of deteriorating public finances, although its rating would remain at A3 given its large reserves.

Moody's upgraded Hong Kong's rating outlook to positive in February 2001. Its rating is the same as the mainland, because of the close links between the two economies.
Condon said a steady pick-up in Hong Kong export growth would eventually boost domestic confidence and spending.

7. Buyers snap up Aegean Coast apartments
by Eli Lau, The Standard September 10, 2002

Flats at Sun Hung Kai Properties' Aegean Coast were snapped up quickly last night as the developer launched internal sales of the Tuen Mun project.

About 200 flats were sold by 9pm, just three hours after the start of the sale. SHKP expected the total sales last night to reach about 400 flats.

SHKP had earlier announced that an initial batch of 24 flats for the Aegean Coast development on Castle Peak Road would be released at an average price of HK$2,388 per square foot, with the lowest going for HK$1,980 psf.

The units attracted more than 2,000 registrations - 82 times oversubscribed - and as a result, the developer decided to increase the number of flats on offer. A total of 487 flats have been reserved for internal sale.

The residential project is jointly developed by Luk Hoi Tong, Henderson Land Development and Sun Hung Kai Properties.

Meanwhile, SHKP's largest rival, Cheung Kong Holdings, is expected to unveil a discount plan targeting Home Ownership Scheme (HOS) flat owners who purchase its Hampton Place units in West Kowloon as soon as this week.

It is believed that Cheung Kong will offer a tailor-made payment package with low interest rates to the HOS flats owners, similar to the terms offered for the company's Banyan Gardens project in Sheung Sha Wan.

Executive director Justin Chiu revealed last week the proposal was aimed at HOS flat owners who had been in their flats for less than two years. 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.

The company was in talks 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, Chiu said.

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