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1. Flats price war escalates

2. McNealy promises to make sure that Sun rises again

3. 800 years of data shows commodities immune to trends

4. No 1 SAR tycoon triggers flurry of blue-chip director buy-backs

5. Big Blue to pump US$23m into Linux centre

6. You'll find very few holes in this busy scheduler

7. Time to heed Greenspan's fiscal advice

8. Unreasonable art of investing

1. Flats price war escalates
SOPHIA WONG, SCMP Sep 14, 2002

A price-cutting war among property developers was ratcheted up yesterday after HKR International slashed prices at a Discovery Bay project to a level it claims is 10 per cent below prevailing prices in the area.

The move came a day after Kerry Properties cut prices at a New Territories development by up to 18 per cent compared with the project's launch in March and reflects a growing battle among developers to grab buyers' attention.

HKR International managing director Victor Cha Mou-zing said demand was weak and oversupply was causing developers to offload units cheaply. He denied deliberately undercutting rivals.

The company will release 18 units at its Siena Two project in the Lantau Island project for public sale next Saturday, one day before the official sale of Sun Hung Kai Properties

Aegean Coast development in Tuen Mun.

"The prices [for additional units to be released for sale] could be revised upward if the market response is good, or downward for a poor response. I cannot predict when the property market can recover," Mr Cha said. He denied targeting Sun Hung Kai

Properties' similar resort-style development, saying HKR International considered competing projects when setting prices but did not actively seek to undermine them.

The first batch of 12 high-rise apartments, measuring 658 square feet to 1,175 sq ft, were priced at an average of HK$2,098 per square foot. Another six low-rise units, ranging from 565 sq ft to 1,368 sq ft, were pitched at an average of HK$2,648 per square foot. The cheapest unit will be offered for HK$1.178 million.

At the peak of the market in 1997 comparable high-rise units in Discovery Bay sold for HK$6,000 to HK$8,000 per square foot while low-rise units reached more than HK$10,000 per square foot.

Sun Hung Kai Properties has released additional 24 units at its Aegean Coast development for public sale at an average price of about HK$2,100 per square foot. The cheapest unit is priced at HK$966,400, or HK$1,479 per square foot. The first batch of 24 units was offered a few weeks ago at an average of HK$2,316 per square foot for cash.

Commenting on the broader market situation, Mr Cha said demand was weak and sales of new projects were slowing down after a flurry of new launches.

He urged the government to review its housing policy and actively reduce supply by all means possible to bolster market sentiment.

Hong Kong Resort marketing general manager Chan Chi-ming said about 100 larger-sized units at Siena Two with better views would be released for internal sale today at higher prices.

Siena Two comprises 757 units due to be completed by March next year. Mr Chan said the developer could release up to 266 units for internal sale.
Mr Cha said the company could reap HK$2 billion after all units were sold.
He said he expected the project would be profitable, although much less than originally hoped for.

Surpass Strategy Consultant managing director Charles Lai Chin-pang said prices in Discovery Bay were under pressure due to abundant supply in nearby Tung Chung.
On Monday, Cheung Kong (Holdings) will release 100 units at its West Kowloon development, Hampton Place, for "internal sales", which is not subject to market restrictions, at an average of HK$2,800 per square foot.

2. McNealy promises to make sure that Sun rises again
BLOOMBERG in New York, SCMP Sep 14, 2002

Sun Microsystems chief executive Scott McNealy says he is committed to increasing the company's profitability, a goal that may include further steps to restructure the network specialist.

"We've got to get this company to a higher level of profitability and we are going to do that through growth or through restructuring," Mr McNealy said this week. "We are doing everything we can to grow into the current structure."

Sun's shares are trading at their lowest price since December 1996. Sales dropped 32 per cent in the year ending June as businesses delayed buying new servers and as rivals such as Dell Computer and Microsoft delivered new computers and software. In

October Mr McNealy reduced his staff by 3,900, or 9 per cent, less than some investors said was needed to stave off losses.

"The cost structure is still sized for a hyper-growth market and we're clearly not in a hyper-growth market," Christian Koch, an analyst at Trusco Capital Management, said.

The shares of Santa Clara-based Sun have lost 74 per cent of their value this year, compared with a 35 per cent decline in the Standard & Poor's 500 Computer Hardware Index. Industry-wide sales of servers, including Sun's Solaris, fell 25 per cent last year, and are forecast to decline again this year, researcher IDC said.

"Mr McNealy needs to cut jobs by 15 per cent more in order to return to historical revenue-per-employee levels," Toni Sacconaghi, a Sanford Bernstein analyst, said in a research report two weeks ago.

Sun's market value is now about US$10.6 billion, less than analysts' 2003 average sales estimate of $13.2 billion, based on a Thomson First Call survey.

"We had more buy recommendations when we were selling at 10 times revenue," Mr McNealy said.

3. 800 years of data shows commodities immune to trends
REUTERS in New York, SCMP Sep 14, 2002

While most economists look back five or 10 years to assess long-term inflation trends, one analyst has concluded from 800 years of historical data that there is little threat of inflation, or deflation, even with commodity prices surging to 19-month highs this week.

The Reuters Commodity Research Bureau Futures (CRB) Index, a basket of 17 commodities, rose to its highest since February last year on Tuesday.

"Commodity prices don't trend. There is not going to be much inflation because there is not the demand out there to drive inflation, and I think we won't have deflation like in Japan," said Bryan Taylor, president of Global Financial Data, which claims to have the most extensive historical financial database in the world.

Mr Taylor's data shop has figures on prices of raw goods like wheat dating back to the age of Richard the Lion Heart, feudalism and the Crusades.

"We have one series of prices going back to 1200 collected by old monasteries and it was put together as a consumer price index for England," said Mr Taylor.

In 1200, John Plantagenet had just replaced his brother Richard as king of England. The legendary Robin Hood was stealing from the rich whose wealth depended on the prices of commodities such as iron, wool, salt and livestock.

The CRB Index sprinted to 228.53 on Tuesday. The index, widely watched as a gauge of pipeline price pressures, is skewed toward agricultural commodities and has been propelled largely by rising grains and energy prices.

This put the index up nearly 19 per cent year-to-date and up 25.3 per cent from its nadir of 181.83 last year.

4. No 1 SAR tycoon triggers flurry of blue-chip director buy-backs
ROBERT HALILI, SCMP Sep 14, 2002

The SAR's top tycoon Li Ka-shing is considered a model of market timing. So when he makes insider purchases, it is no surprise other blue-chip directors are quick to follow.
Mr Li spent HK$114 million buying stock in his flagship Cheung Kong Holdings last month. Since then there have been insider purchases in Cheung Kong subsidiaries Hutchison Whampoa and Bank of East Asia (BEA).

Hutchison managing director Canning Fok Kin-ning bought shares of his firm for the second time in the past month. He acquired 50,000 shares on September 5 at $51 each. He had bought 150,000 shares on August 23 at $55 to $55.75 per share. The purchases in the past three weeks have boosted his holdings by nearly 16 per cent to 1.46 million shares.

Fellow director Edith Shih picked up 18,000 shares from August 23 to 28 at $53 to $55 per share. Her purchases more than doubled her holdings to 34,600 shares. The counter closed at $51.25 yesterday.

BEA director Simon Li Fook-sean, bought 100,000 shares on September 5 at $14.38 per share. That was the first purchase by a director of the bank since January last year.

BEA's share price has fallen by more than 17 per cent since the first week of May. The group announced last month profit attributable to shareholders of $786.59 million for the six months to 30 June, down by 22.3 per cent from the same period last year. The stock closed at $14.35 yesterday.

Lee Shau Kee, chairman of Henderson Land and Henderson Investment is expected to join the tycoons' buying spree once year-end results are published in the first week of next month.

Mr Lee should focus on Henderson Land which closed at $24.40 yesterday, down sharply from his last purchase price of $31.60 on March 26.

After selling 1.28 million shares of consumer products exporter Li & Fung on April 26 at about $13 per share, US-based fund house The Capital Group waited until the share price fell by 36 per cent before buying back.

The Capital Group bought 4.03 million Li & Fung shares on September 4 at prices ranging from $7.80 to $8.25 per share. The purchase boosted its holdings to 319.58 million shares or 11.05 per cent of the issued capital.

Investors should note that the fund manager's sale last April was made at a hefty profit as the group had previously acquired nearly 28 million shares on January 2 at about $9 per share.

Capital Group's purchases were preceded by Li & Fung executive director Annabella Leung Wai-ping who acquired 320,000 shares from August 29 to 30 at an average of $8.57 each. Those were the first purchases by a director of the company since April 2000.

Li & Fung closed at $8.20 yesterday.

Robert Halili is managing director at Asia Insider.

5. Big Blue to pump US$23m into Linux centre

DANYLL WILLS in Singapore, SCMP Sep 14, 2002

IBM will invest US$23 million in the IBM Open Computing Centre in Singapore, according to chief financial officer John Joyce.

He was speaking in Singapore at the official opening of the centre. The initiative is a collaboration between IBM and the Nanyang Polytechnic (NYP).

About half of that money will be spent this year and the rest over the next three years. The centre will focus on training engineers, and developing and then testing software. The emphasis will be on Linux, open source and IBM's WebSphere.

"Across the world, IBM is seeing open standards appeal to governments who value freedom from proprietary operating systems and favour a stable, secure, scalable, open and cost-effective infrastructure to deliver business value," Mr Joyce said.

"We have worked with various governments and are seeing the trend towards open computing worldwide. Here, today, the collaboration between NYP and IBM marks a significant milestone for Singapore's IT industry."

The company once known for its proprietary products has become a champion of open standards. "The way forward for the global IT industry is to render proprietary standards irrelevant. Without open standards, it will be impossible for companies and institutions now locked into proprietary platforms to share data, applications or computing power," he said.

At IBM's Changi Business Park, there will be a Linux Integration Zone that will promote open standards among IBM's business partners.

The chief operating officer of the Infocomm Development Authority (IDA) of Singapore, Tan Ching Yee, said she was happy to see the collaboration. "IDA is pleased to see this strategic collaboration between Nanyang Polytechnic and IBM Singapore in launching the WIZ Web Services Innovation Zone.

"We support open standards because it provides users an opportunity to choose among products from multiple suppliers and gives IT companies the ability to offer innovative solutions."

Lin Cheng Ton, the principal and chief executive officer of NYP, praised open standards as the way of the future. "We believe [they are] a key element of scalable and secure applications that integrate into existing computing environments and provide seamless transactions across a wide variety of platforms."

IBM and NYP will offer quick-start training programmes for those unfamiliar with Linux and open source and help other business partners who want to test their software.

IBM was a keen supporter of open standards, Mr Joyce said. "At IBM, we understand and passionately support this notion of technology independence. We've transformed our own company from an organisation that made its fortune from proprietary technologies into one that sees its future in openness," he said.

IBM was better suited to understand these issues than anyone else. "Maybe it's because we are so acutely aware of the fallacy of proprietary controls that we have learnt to resist them. In a customer-driven world, open architectures and open standards are inevitable," he said.

6. You'll find very few holes in this busy scheduler

DAVE HORRIGAN, SCMP Sep 14, 2002
Every time I meet a Windows user who discovers that I am a Mac specialist, they ask me the same question: Does the Mac have a good calendar/contact application?
The simple answer is: yes.
In OS X, Entourage, Now Up-to-Date and Now Contact are perfect for personal or business scheduling and contact management.
I actually use both of these applications.
I work with Entourage for e-mail contact management because it is so automatic and

integrated with my e-mail application, and I use the Now product for my main contact management and scheduling. Apparently there is nothing comparable in the Windows world for individuals, although PowerOn Software, the makers of Now Contact/Now Up-to-Date, have a Windows version in beta testing (www.poweronsoftware.com).
This week Apple released its latest iApp - iCal. iCal is a calendar application that has all the virtues of iApps such as iMovie or iTunes in that it is simple, handy, innovative and free. And the colour-coded schedules make the application uniquely attractive. iCal is designed so that as you explore its simple interface, you discover that it is a powerful application.

Like other iApps, iCal breaks new ground with features rarely available outside the corporate environment. Most spectacular of these is its ability to publish your calendar on the Internet or on a network so the other people who are part of your schedule can refer to it on the Internet and add their own scheduling changes. You can also "subscribe" to the other people's calendars and your iCal will find them and check regularly for changes. For most people, this will require having a .Mac - dotMac - account.

iCal, along with Apple's new Address Book application, introduces OS-level contact management and schedule linking. This means if you are scheduling a meeting, you can select from your database those you want to attend and they will be e-mailed an invitation from within your calendar program. OS-level contact management also allows other applications to utilise your master contact list instead of having to have a separate database.

iCal and Address Book are also designed to synchronise with different hand-held devices, but they require another application called iSync, which will be available later this month. Until then, you can still manually sync your Palm or iPod by using vCal-format import and export. When iSync arrives, and if you have a Bluetooth-connected device, your Mac will automatically find and update your hand-held each time you walk near it.

As is traditional with Apple's iApps, the first version usually lacks a feature or two and iCal is no exception. First, it does not support double clicking on banner-type events or any event that lasts all day. This is a bug. If you want to edit one of those events, you have to delete it and enter it again. You also cannot assign or reassign events using drag and drop. This is particularly a problem after importing your events from another calendar application that does not have colour-coded items.

On the subject of importing, iCal does not yet import from Now Up to Date, the most popular Mac calendar, although there is a workaround involving importing into Entourage and then exporting to iCal. And iCal lists appointments using a 24-hour clock, which is fine for military fighter pilots but not useful for regular people. I also found the contrast of the interface too weak, making it hard to read.

It works only in OS 10.2, which means that iCal will cost money if you do not already have the latest version of the OS.

But all in all, it is a very impressive version one, and there is nothing I've discovered that would keep me from using it, especially when you consider some of its delightful and unique features.

Realistically, most people do not have Bluetooth phones or online family calendars yet, but iCal stands on its own, even if it did not have these futuristic features. And since these technologies will become more broadly available, I believe that Apple has laid the groundwork for making the Mac's digital hub a more essential part of our lives.

E-mail Dave Horrigan at horrigan@electriciti.com with your Mac queries.

7. Time to heed Greenspan's fiscal advice

JAKE VAN DER KAMP, SCMP Sep 14, 2002
Today I shall start by twisting the facts for you. How lucky we are that United States Federal Reserve chairman Alan Greenspan's warnings on Thursday about fiscal discipline need not apply so strenuously to us in Hong Kong just yet.

Referring to a United States federal deficit now running at US$192 billion a year (it was an annual surplus of US$270 billion little more than year earlier), Mr Greenspan told members of the House of Representatives that restoring fiscal discipline must be a high priority.

"History suggests that an abandonment of fiscal discipline will eventually push up interest rates, crowd out capital spending, lower productivity growth and force harder choices upon us in the future," he said.

". . . Without clear direction and constructive goals, the built-in political bias in favour of budget deficits likely will again become entrenched," he added, calling for a renewal of rules to enforce budget discipline.

You can understand his worries when you look at the first chart. On the bottom line, you can see the record of the US fiscal deficit, now running at 5.3 per cent of US gross domestic product. How lucky we are in contrast, as the chart shows, that our own fiscal deficit is still only 1.8 per cent of our GDP.

Now why is this a twisting of the facts? Simple. It is because I have twisted these two lines around. It is actually Hong Kong that has a fiscal deficit of 5.3 per cent of GDP while the US figure is only 1.8 per cent.

So if this 1.8 per cent is enough to make Mr Greenspan warn US legislators about the need for fiscal prudence, why have our own monetary and budget authorities done no more than remind wastrels in our government that they have become a little profligate at a 5.3 per cent deficit? This calls for a thunder of rebuke, not just a few mild reproaches.
Of course I can also offer evidence in mitigation for them. As the second chart shows, US federal debt now runs at about 60 per cent of GDP. We in contrast have net government savings equivalent to about 53 per cent of GDP. Unlike the US, we have a cushion to absorb a period of deficit spending.

There are two difficulties with this cushion, however. The first is that a cushion is something you sleep on and if our government falls asleep on this one, it may wake up in a few years to find the cushion gone. We would do well to remember it now.

The second is that we have a vast unfunded liability for civil service pensions. The existing civil service pension reserve fund with assets of HK$11.7 billion will cover only a small fraction of it.

I shall leave to the actuaries exactly how much more would really be needed if we are not to pay out these liabilities from operating revenues, but all the estimates I have heard run into hundreds of billions. Those free fiscal assets we boast of may in reality be a good deal smaller than we think.

Yes, it is time to listen to Mr Greenspan.

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

8. Unreasonable art of investing
CHET CURRIER of Bloomberg, SCMP Sep 14, 2002

Something in the minds of smart people does not love the stock market. Listen to the wise heads speaking out about the dangers of bargain-hunting in stocks even now, at prices far below what you had to pay two or three years ago.
"Stocks stink," the revered bond mutual fund manager Bill Gross says.

The idea that stocks, with their capacity for benefiting from economic growth, can be counted on to return more in the long run than other types of investments is "unrealistic" and "based on a flawed conventional view", say the esteemed financial thinkers Rob Arnott and Peter Bernstein.

What is striking is how neatly these comments fit in with a centuries-old tradition of uneasiness and suspicion towards stocks among the world's finest minds.

The origins of this may have something to do with the fact that brain power has never translated reliably into success in equity investing. Sir Isaac Newton, sometimes described as the smartest person ever, dropped a bundle in the 1720 debacle known as the South Sea Bubble. Mark Twain, sometimes described as the greatest United States writer ever, suffered investment losses in the 1890s that drove him deeply into debt.

The stock market's behaviour can be so "irrational", to use the word applied to it in the roaring 1990s by Federal Reserve chairman Alan Greenspan, among others.

Take something solid like a bond and you can gauge its default risks, calculate its yield to maturity, analyse whether it is priced attractively relative to other similar, knownquantities. A sharp mind gives you a big edge. With stocks, after you do the analysis, you still have no way of gauging where the whims of the market will carry you.

Stock traders get all worked up about nutty events such as splits, in which a company swaps you two shares worth US$5 for one that sold for US$10. The total absence of new value added does not matter as long as the "psychology" surrounding the investment gets juiced up.

Investment theory, no matter how brilliant, can be tough to put into practice.

Harry Markowitz won a 1990 Nobel Prize for his pioneering work on the sophisticated principles most investing institutions employ today. A few years later, when this apostle of mean-variance models was asked how he was investing his retirement funds, he wasquoted as saying: "I split my contributions 50-50 between bonds and equities."

Genius can be sidetracked by a matter as simple as diversification, one of the best and most versatile tools available to investors for protecting against risk.

"It is easy to buy and diversify at the time of investment," says David Lee, managing director at Ferrell Asset Management in Singapore. "The trouble in this new interlinked and globalised world of cyber-finance is to find securities that have constantly and consistently low or negative correlation."

Stock-market folk wisdom tends to downgrade the value of intelligence.

"Never confuse brains with a rising market," runs one enduring adage.

Bull markets are said to thrive on the "greater fool theory", under which one can happily buy a stock without bothering to do much analysis. Just find someone even more benighted to sell it to at a higher price after a decent interval has passed.

Warren Buffett of Berkshire Hathaway, the "oracle of Omaha" known for his frequent zingers about the follies that befall the stock market, said at his company's annual meeting in May: "We don't think returns are going to be terrible. We just think people whose expectations have been built up by the bull market will be disappointed. There's nothing wrong with earning 6 per cent or 7 per cent on your money."

The stock market certainly has its flaws. In one sense, though, it is beautifully egalitarian. The smartest people do not know any better than the rest of us what is going to happen next.