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for. 1.
The Vet 2.
KCRC invited to plan and design the Kowloon Southern
Link 3.
S&P sees no end to property fall 4.
Property to fall further, says S&P 5.
Victor Li relinquishes Hopewell directorship 6.
Software snags make the road to e-government far from
smooth 7.
No way to escape from instant messaging 8.
Queue forms at door of Deposed Big Cheeses Club 9.
Monitor 10.
Wheeler 11.
HSI distorted, says study 12.
It’s another Sister Slam 13.
Monitor 14.
Mini peg panic over . . . for the moment at least
15.
Believing in a jet plane 16.
Shares weaken as players stay away 17.
Developers' shares slump after slow weekend sales 18.
HSBC chiefs back currency peg 19.
In his words 20.
DOONESBURY by G B Trudeau
1. The Vet A
woman brought a very limp parrot into a veterinary surgery. As she lay her pet
on the table, the vet pulled out his stethoscope and listened to the bird's chest.
After a moment or two, the vet shook his head sadly and said, "I'm so sorry,
Polly has passed away."
The distressed owner wailed, "Are you sure?
I mean, you haven't done any testing on him or anything. He might just be in a
coma or something."
The vet rolled his eyes, shrugged, turned and left the room, returning a few moments
later with a beautiful black Labrador. As the bird's owner looked on in amazement,
the dog stood on his hind legs, put his front paws on the examination table and
sniffed the dead parrot from top to bottom. He then looked at the vet with sad
eyes and shook his head. The
vet fussed the dog and took it out, but returned a few moments later with a cat.
The cat jumped up and also sniffed delicately at the ex-bird. The cat sat back,
shook its head, meowed and ran out of the room. The vet then said “your
parrot is most definitely 100% certifiably ..... dead." He
then turned to his computer terminal, hit a few keys and produced a bill which
he handed to the woman. The parrot's owner, still in shock, took the bill. £150!,
she cried, £150 just to tell me my bird is dead.!!" The vet shrugged.
"If you'd taken my word for it the bill would only have been £20, but
what with the Lab report and the cat scan......"
2. KCRC invited to plan and design the Kowloon Southern Link
Hong
Kong Government, 24 September 2002 The
Government today (September 24) invited the Kowloon-Canton Railway Corporation
(KCRC) to proceed with the detailed planning and design of the Kowloon Southern
Link. The Kowloon
Southern Link (KSL) is a rail project recommended in Government's Railway Development
Strategy 2000 (RDS-2000). It extends the West Rail from Nam Cheong Station to
Hung Hom via West Kowloon and Tsim Sha Tsui. RDS-2000 sets its target completion
date in 2008 to 2013. When the KSL is completed, the West Rail will take over
the Tsim Sha Tsui Extension currently being constructed, and both East Rail and
West Rail will terminate at Hung Hom with cross-platform interchanges provided.
A Government
spokesman said: "With this Link, not only can 700,000 population now and
one million in the future along the West Rail's catchment have more direct access
to the main employment/business areas in urban Kowloon, but passengers also can
travel conveniently between West Rail and East Rail through their common terminus
at Hung Hum." "KCRC's
Project Proposal for the KSL is both technically and financially sound. The recommended
railway alignment along and station layout at Canton Road can better serve the
passengers whilst minimizing land resumption and disruption to land use and the
harbour. The project allows passengers from Northwest New Territories to pay an
additional fare no more than $1 to travel to the new stations in the heart of
Kowloon. At an estimated cost of $9.2 billion (in 2000 prices), the project is
financially viable and no property development support from Government is required.
KCRC intends to finance the project through internal resources and commercial
debt," the spokesman said. The
proposed KSL will run along the eastern side of the Tung Chung Line, diverge at
West Kowloon to go underneath Canton Road, and then turn to join up with the East
Tsim Sha Tsui Station at Salisbury Road. It will be in tunnel, which can help
mitigate environmental implications. The project will provide two new stations,
one at West Kowloon and the other underneath Canton Road where they can be connected
by pedestrian linkages to the Airport Railway's Kowloon Station and the MTR Tsim
Sha Tsui Station respectively. Construction
work is scheduled to start in mid 2004 for completion around end 2008/early 2009.
The project is expected to create about 3,000 job opportunities at its construction
peak in the next few years. "Proceeding
with the KSL reflects Government's commitment to continuous rail network expansion
to meet the community's long term needs beyond the current cyclical economic downturns.
Its construction will also help boost the economy and create job opportunities.
Government and KCRC will work in partnership and consult the public in developing
the railway scheme so as to speed up the work, where practicable, and ensure a
sustainable design with public acceptance." the spokesman added.
3. S&P sees no end to property fall
The
Standard, 25 September 2002 Hong
Kong's property development industry would remain fragile as residential prices
and grade-A office rentals faced continued decline, international ratings firm
Standard & Poor's said yesterday. Residential
property prices would drop by 5-10 per cent and office rents would fall 10-20
per cent over the next 12 months, S&P said. Local
developers' margins were likely to be capped by unsold properties, and they would
be looking to expand their mainland portfolios to supplement earnings, corporate
ratings director John Bailey said. ``Looking
to 2004, I think it's really going to depend on the economy whether prices will
rise,'' he noted. ``But at this stage, there's no indication of a substantial
economic rebound.'' Bailey
predicted developers would gradually get out of the recent price war on residential
projects. ``I
think they didn't want to get into a price war, although there will still be some
competition.'' S&P's
report ``Hong Kong Property Review: Where to Next?'' expects office rents to remain
squeezed by weak demand and an increase in the amount of vacant stock in the secondary
market. The report
said the vacancy rate for grade-A offices has recently reached about 8 to 10 per
cent overall, and climbed to more than 10 per cent in Central. The
supply of new grade-A office space would increase to three million square feet
next year, leading to a further weakening in office rents, the agency said. S&P
warned that it might downgrade the corporate ratings of some developers unless
their financial ratios improved. The agency currently rates eight local property
companies, of which five carry negative outlooks. ``We
are looking for substantial cashflow growth as many developers have been working
hard to restructure their balance sheets by lengthening their debt maturity profiles
at the bottom of the interest-rate cycle,'' Bailey said. Developers
were trying to diversify. Sun Hung Kai Properties, for example, was moving into
technology and telecommunications. ``In
the near term, unemployment, deflation and heavy presale efforts are hampering
prices,'' Bailey said. Property prices have tumbled by 50-60 per cent since their
peak in 1997. The
Hang Seng property sub-index, which tracks nine major property stocks, dropped
1.34 per cent yesterday to close at 10,551.18. The index has lost about a third
of its value this year, versus a 19 per cent fall on the benchmark Hang Seng Index. Cheung
Kong fell 1.4 per cent to HK$49.20 yesterday, compared with its year high of HK$85. Sun
Hung Kai Properties lost 10 cents to close at HK$43.70 and Henderson Land Development
fell 2.64 per cent to HK$22.15. New
World Development Company shares fell 5.14 per cent to HK$4.15.
4. Property to fall further, says S&P
SOPHIA
WONG, SCMP 25 September 2002 Credit
rating agency Standard & Poor's yesterday delivered another bearish assessment
of the property market and forecast residential and office values would fall further
in the coming year. The
agency predicted home prices could decline by another 5 per cent to 10 per cent
and grade-A office rentals by 10 per cent to 20 per cent over the next 12 months.
Corporate ratings
director John Bailey warned that some property companies' ratings might be adjusted
downwards if their financial ratios did not improve. The
bearish projections are in line with the recent weakening of the market but contrast
with comments by property tycoon Li Ka-shing who said on Monday that he believed
the market had bottomed out. Residential
transactions have dried up further in the past week after a fresh round of price
cuts by developers aiming to lure buyers. Analysts said developers were facing
the reality that they would have to cut prices and they expected the battle for
buyers to intensify. Mr
Bailey warned of a possible ratings downgrade for developers if they failed to
show substantial profit and cash flow growth in the next 12 to 24 months. Over
the past six months, the credit-rating agency has downgraded the ratings or credit
outlooks of eight property-related companies. Some
of Hong Kong's biggest property stocks are languishing at multi-year lows. They
fell again yesterday, although the release of yesterday's S&P report had relatively
little impact.
Mr Bailey said: "The Hong Kong property market is fragile. Residential property
prices are now 50 per cent to 60 per cent below their 1997 peaks, yet prices remain
soft and could fall further this year due to persistent oversupply." He
expected prices for flats could fall another 5 per cent to 10 per cent over the
next 12 months because developers were trying to liquidate inventories amid weak
demand. S&P
corporate and infrastructure ratings associate Renee Lam said the market would
be cautious in the short to medium-term. "The property market will mainly
be affected by the overall economy, which is unlikely to pick up before 2004,"
she said. Mr Bailey
said housing supply would increase substantially over the next couple of years.
Developers would seek to speed up sales to offset decreasing profit margins and
therefore would continue to keep prices low, he said. Despite
head-to-head competition, developers were trying to avoid a price war, Mr Bailey
said. S&P
Asia Pacific corporate and government ratings managing director Paul Coughlin
said prices were affected by the deflationary environment. The adjustment in property
prices was part of the economic recovery process and would increase Hong Kong's
competitiveness. Asked
whether a revised government policy to limit land supply could help the market,
he said the effect would not be dramatic since short to medium-term housing production
could not be reduced. Meanwhile,
Mr Bailey said overall grade-A office rentals could drop a further 10 per cent
to 20 per cent, with Central seeing the larger decrease because of substantial
new supply. The vacancy rate in Central had reached 8 per cent to 9 per cent,
higher than in peripheral areas, he said. "The
vacancy rate will continue to increase as take-up is extremely weak," he
said. "We expect further reductions in [grade-A office] rentals when Two
International Financial Centre is completed next year." Mr
Bailey said some property companies were diversifying into the mainland and overseas,
which exposed them to significant development risks. In
May, S&P downgraded its credit ratings for Swire Pacific, Hongkong Land and
Hysan Development and revised the credit outlooks for Kerry Properties, Sun Hung
Kai Properties and Wharf (Holdings) from stable to negative, implying a possible
downgrade. Cheung Kong (Holdings)' credit outlook was changed from stable to negative
last month. Cheung
Kong shares lost 70 cents to HK$49.20 yesterday while Sun Hung Kai Properties
was down 10 cents to HK$43.70. Henderson Land shed 60 cents to HK$22.15, New World
Development fell 22.5 cents to HK$4.15, and Swire Pacific A dropped 40 cents to
HK$30.60.
5. Victor Li relinquishes Hopewell directorship
DENISE
TSANG, SCMP 25 September 2002 Victor
Li Tzar-kuoi, deputy chairman of conglomerate Hutchison Whampoa, will retire as
a director of Hopewell Holdings following a blazing public row between the two
companies. According
to Hopewell's latest annual report, released yesterday, Mr Li will relinquish
his directorship at the infrastructure firm's annual shareholder meeting next
month. The move
ends Mr Li's 11-year stint on Hopewell's board which started with the Li family's
flagship Cheung Kong (Holdings) buying a minority stake (subsequently divested)
in Hopewell in 1991. Mr
Li's departure had been widely expected following a personal attack on his father,
Cheung Kong chairman Li Ka-shing, by Hopewell Holdings' Sir Gordon Wu Ying-sheung
over the proposed Hong Kong-Macau-Zhuhai bridge. Victor
Li did not return calls yesterday on why he will not offer himself for re-election
to the Hopewell board while Hopewell declined to comment. Li
Ka-shing on Monday said he felt "pity" and "regret" over Hopewell
chairman Sir Gordon's charges of his vacillating support for the project. Sir
Gordon, who has led the campaign for the link, claimed Mr Li reneged his commitment
to the project following discussions between the two men 10 years ago. Hutchison
managing director Canning Fok Kin-ning has publicly disavowed the financial viability
of the venture and opposed government subsidies over port development. Hutchison
is one of Hong Kong's largest port operators and critics claim the company's opposition
stems from a desire to maintain control over terminal handling charges on both
sides of the border. "The
departure of Victor Li comes at an interesting and a sensitive time," a research
head at a major investment bank said yesterday. "Victor
Li joined Hopewell as a director in the early 1990s because of Cheung Kong's strategic
stake in the company. As Cheung Kong no longer holds the stake, it was a matter
of time before seeing his resignation," he said. He
added that the row over the bridge controversy might have triggered his retirement.
"Victor
Li's role in Hopewell is increasingly embarrassing as the debate goes on,"
the investment banker said.
6. Software snags make the road to e-government far from smooth
DANYLL
WILLS, SCMP 25 September 2002 The
Hongkong Post e-Cert software is now obsolete. For all the government's talk about
a knowledge economy, its own post office can't even keep up to speed.
I found
that users can no longer generate their own private key through the online service
(www.hongkongpost.gov.hk) unless
they are running very old versions of Windows and have failed to keep their software
patches up to date. This time last year, I successfully renewed an e-Cert online,
generating my own keys, but this year, I cannot. The latest manual refers to Netscape
4.5, Internet Explorer 5.01 and Windows 98 or NT. I
have PCs running Windows XP Professional and Windows 98 and have tried using the
browsers supplied on the Hongkong Post CD-Rom. But neither the Netscape nor IE
version of the e-Cert software works on current versions of Windows 98SE or Windows
XP Pro. As a result, we are forced to use the "Central Key Generation"
service, whereby Hongkong Post sends you your private key on a floppy disk, through
the mail. How hi-tech! Users
are asked to believe that Hongkong Post, a government agency, does not keep copies
of users' private keys, which can be used to decrypt secure e-mail and digitally
sign documents. DAVID
WEBB, Mid-Levels Hongkong
Post has been trying to implement electronic certification as the first step towards
e-commerce and e-government. It is perplexing to think that, in the year 2002,
it is still creating e-Certs that are tied to a specific operating system. It
would seem that the road to e-government will not be smooth. However, the post
office has responded to Mr Webb's complaint. Matthew
Wong, assistant manager of CA administrative services at Hongkong Post, said:
"For your information, if subscribers choose the Central Key Generation Service
to generate the HKPost e-Cert, the private key will be immediately removed from
our system after it is stored on the floppy disk. "This
practice was published in our Certification Practice Statement (CPS) in Section
6.1.1 and 6.2.3. You may wish to download a copy for reference from www.hongkongpost.gov.hk/5digital/images/cps-en10.pdf
"Frankly
speaking, our e-Cert software 2.0 for certificate generation by subscribers does
not run properly under Windows XP at this moment. We are now developing a new
version of software to support it. "In
the meantime, for those subscribers who are using XP, we suggest that they use
our Central Key Generation service to generate their certificates. After the certificates
are prepared, we will deliver them to the subscribers' address free of charge.
I believe it is an appropriate way to provide XP users with our e-Cert service.
"Should
you have any questions, please call me at 2921 6148."
7. No way to escape from instant messaging
DAVID
WILSON, SCMP 25 September 2002 Your
pulse is racing. Your mind is whizzing and yet you feel too dazzled and frazzled
to hold an intelligible conversation. These
symptoms can mean two things. Either it's time to cut down on the double espressos
or you have been indulging in an addictive digital pursuit especially popular
with teens and snappily known as instant messaging (IM). In
short, instant messaging means that as soon as you log on to the Internet, you
are informed which of your friends are online. They in turn are then alerted to
your presence and you can "interact" (prattle profusely) using online
chat: the real-time exchanging of text messages. Blame
ICQ, MSN Messenger, Yahoo! Messenger, Jabber and AOL Instant Messenger (AIM),
among other freely downloadable software systems that enable the practice. If
you happen to be masterful at multi-tasking or fortunate enough to possess several
personalities, you could run all at once. Or
you may just prefer to run a single system and allow contact from as many friends
and strangers as materialise from the consensual hallucination we call cyberspace.
This is fun so long as you are neither female nor endowed with a "screen
name" that sounds remotely feminine. If
you are, you can guarantee that, the moment you hit the Web, you will be accosted
by a male American teenager who wants to talk dirty. To deter predators, make
yourself sound as repulsive as possible, adopting a screen name such as "redneck"
or "infectious". Beware
of viruses too. Hackers are increasingly attacking systems through instant messaging.
If you do decide to download one, this means you have opened the door to intruders
that use systems to launch distributed attacks across the Net. But
don't shoot the messenger. At least IM is fast. E-mail, although it usually arrives
at its destination in less than a minute, is catatonic in comparison. Instant
messaging allows you to answer your friends as fast as talking to them on the
phone. So why
not just talk on the phone? Well, some IM users suffer from "phone-phobia".
Others are flat-rate Internet connection misers who, under the right circumstances,
would sell their own motherboard and, believing talk should be cheaper than cheap,
see no reason why they should pay for a call. Then
there are those who just enjoy the flashing frantic buzz of instant messaging
and the business crowd who are discovering that instant messaging allows them
to hold virtual conferences and collaborate on projects easily. Although
chat was one of the earliest Internet drivers, instant messaging took off in 1996
when Mirabilis, a company founded by four Israeli programmers, introduced ICQ,
a free instant-messaging utility that anyone could use. By
1998 ICQ had notched up more than 40 million registered users and so AOL snapped
up the utility for a cool US$287 million. More
than 60 million people now use AOL Instant Messenger (AIM) on their personal computers
and the technology is thriving, with variations proliferating. There are for instance
IM systems with voice and, in the case of the IBM Babble project, visual representations
of the speaker that indicate who is present in a conversation, how recently they
have spoken, and even the degree of participation among multiple users. In
the future, instant messaging is expected to become "pervasive", as
proponents blithely put it. "Smart" instant messages will zero in on
recipients via mobile devices such as the wireless phone and hand-held PC, whether
they are at home watching TV, at work feeding the photocopier, or meditating in
a cave. Resistance is useless. Perhaps
what we need is a software system that ensures we have something worth saying.
No more vacuous chat-room acronyms or emoticons. Just insight, wisdom and lightning
wit. Confused
by computer jargon? E-mail technopedia@scmp.com
with your questions.
8. Queue forms at door of Deposed Big Cheeses Club
MATTHEW
LYNN of Bloomberg, SCMP 25 September 2002 The
club of Deposed Big Corporate Cheeses is growing. Lukas Muehlemann, formerly the
boss of Credit Suisse Group, is the latest and one of the least surprising additions
to its rolls. After
making two disastrous acquisitions, from which his company may well never recover,
Mr Muehlemann's elevation to the club was long expected. At the bar, he can mingle
with the likes of Michel Bon, of France Telecom, Ron Sommer, of Deutsche Telekom
and Jean-Marie Messier of Vivendi Universal, among the many other birds who have
been tipped from their lucrative perches. The
big surprise of the past few months is not those who have departed. Mostly, those
who have been kicked out deserved to go. But so do many others who, by some miracle,
look to have survived. Everyone
will have his own list of chief executives who should have been fired. Here is
my selection: Sir
Christopher Gent, chief executive of Vodafone Group. Sir Christopher has presided
over acquisitions worth around US$200 billion to produce a company the market
now values at about half that. He insists on pouring billions into building third-generation
mobile networks, even though the rest of the world has concluded they are virtually
worthless. His pride may well destroy what could still be a great company. Juergen
Schrempp, chief executive of DaimlerChrysler. Mr Schrempp had a big idea, which
was that for Daimler to survive it was not enough to make the world's most desirable
luxury cars. It also had to own a third-rate American mass-market manufacturer.
Unfortunately,
it turned out to be a bad idea. BMW made a similar mistake when it bought Britain's
Rover, but quickly reversed it, and is now doing fine again. Mr Schrempp sticks
doggedly to his path, despite 24 motions at the last annual general meeting calling
for him to be fired or the company broken up. Jean-Pierre
Garnier, chief executive of GlaxoSmithKline. Once there were three British pharmaceutical
companies called Glaxo, Wellcome and SmithKline Beecham, all excellent in their
own way, and making the UK industry the strongest in the world. The three are
now one run by Mr Garnier. The
theory was that a vast, bureaucratic organisation with limitless budgets and palatial
office buildings would be a hotbed of creative, cutting edge science. To the surprise
of no one except Mr Garnier, it turned out that the more money you spent, and
the bigger the lab, the fewer original products emerged. GlaxoSmithKline's
share price has collapsed from £21 (about HK$255) two years ago, to just
over £11 now. Its pipeline is among the worst in the industry. Mr Garnier's
solution? Maybe another merger. Stephen
Case, chairman of AOL Time Warner. Mr Case thought that combining an Internet
service provider with an entertainment and publishing company would produce a
new economy powerhouse for the new century. It
was an interesting thought, so long as you did not think about it for more than
three seconds, at which point it unravelled. William
Harrison, chief executive of JP Morgan Chase. Mr Harrison merged Chase Manhattan
and JP Morgan in 2000. Last year, the new bank earned less than a third of what
Chase did in 1999. Now Mr Harrison is talking about firing lots of people for
making such a mess of things. What
does that list prove? If you want to hold on to your job, there are three things
you have to do. One, create a myth of indispensability. Sir Christopher holds
on to his job because people think the company would fall apart without him. Two,
make sure there is no successor. Mr Garnier stays in charge because no one can
think with whom to replace him. Three, divide and rule. Mr Case clings to power
because the divisions are feuding so fiercely they forget he's there. At
some point, that will change. No one is indispensable, there is always a successor,
and the ruled occasionally unite and rebel. When that happens, expect the Deposed
Big Corporate Cheeses Club to roll out its red carpet to welcome some new members.
9. Monitor
JAKE
VAN DER KAMP, SCMP 25 September 2002 Visiting
foreign politicians trying to be helpful should sometimes exercise a little more
care not to exhume ideas that their local counterparts have reason to bury and
forget. Finland's
Foreign Trade Minister Jari Vilen did it this week at a Finland-Hong Kong "networking
luncheon" (a new one for my collection) when he asked Secretary for Commerce,
Industry and Technology Henry Tang Yin-yen to say a few words about CEPA. CEPA,
which stands for Consolidated Electric Power Asia, is the brainchild of our visionary
Gordon Wu Ying-sheung (no Sir Gordon from me if we do not also speak of Sir Donald
or Sir Ka-shing) and it is a fine example, to be sure, of our ability to spread
our ideas in technology across the region under the guiding light of Chief Executive
Tung Chee-hwa (no Sir C.H. here for sure). Oops,
sorry, wrong CEPA. Mr Wu's is so long dead I doubt you would even find a skeleton
in the coffin if you tried to exhume it. My apologies, the CEPA Mr Vilen was referring
to stands for Closer Economic Partnership Arrangement. The
story on this one, as I heard it, is that last year President Jiang Zemin called
for some new proposals on drawing Hong Kong closer to the motherland and Mr Tung
gave him the usual list of options drafted by the civil service with the usual
contingent of ideas to ignore. Mr
Jiang made the wrong choice. Let there be CEPA, he said, and CEPA there was. Our
civil servants were then told to get busy on this new brainchild. Of
course, Mr Tang did not devote all his remarks to the exhumation of the stillborn
infant. The usual theme for speeches at such diplomatic occasions is the similarities
between the SAR and whatever country it is. If it happens that there are none,
well, just soldier on. Henry did. Finland and Hong Kong, yes sir, as like as two
peas in a pod. But
he did give it a few words and our luck was in. Aside from referring obliquely
to both reasons why CEPA has not a chance of being more than talk (not his conclusion,
of course) he left us with a gem - "it would not be meaningful to set an
artificial timetable". Absolutely
right, Mr Tang, spot on. Let us have nothing artificial here. A target date for
wrapping up talks, even a provisional one, just gets in the way of "actively
engaging each other on the subject" and "making continuous progress
on various fronts". Stick to your guns. Timetable indeed. Nasty pointless
thing. But let
us backtrack a little here. The essential idea behind CEPA is that Guangdong grant
concessions to Hong Kong companies, nothing explicitly stated here, of course,
but you get the point - wink, wink, you're one of our lads. We have a special
short queue for you. Ahem,
WTO, and if you do not know what it stands for by now you can find the Lan Kwai
Fong gossip in the Features section. The rules say there will be no special concessions
and China has just signed. Nice to know, Mr Tang, that you say CEPA will be "fully
WTO-consistent". Pardon me. How? And
then we get that question of how to define a Hong Kong company. "I understand
there has (sic) been concerns," said Mr Tang and, in answer to these concerns,
"we have not come to any conclusions." Not
surprising. Jardines, you see, is Hong Kong's oldest company and word has it that
it would like to join the special short queue. There are others like it with a
foreign element. How
do you winnow the chaff from the wheat of the, ahem, . . . "real" .
. . Hong Kong companies? A certain other word beginning with "R" may
not be used here. No,
Mr Vilen, back to Finland with you. When we bury ideas here we like to tell each
other how live and kicking they still are. Is
it really that different in your own country? Leave the dead in peace, sir. Email
Jake van der Kamp at jakeva@scmp.com.
10. Wheeler
SCMP,
25 September 2002 Cartoon 
11. HSI distorted, says study
ANNETTE
CHIU, SCMP 25 September 2002 Hang
Seng Index 9,197.68 [-117.19] HSBC 83.00 [-1.75] Swire Pacific 30.60 [-0.40] A
study indicates the Hang Seng Index needs a reshuffle to cut down on the influence
of the blue-chip behemoths while enhancing the Chinese flavour to reflect today's
market accurately. HSBC
Holdings' 30 per cent weighting in the index was too high and distorted the real
picture of the Hong Kong market, BOCI Research head of research Ho Cheuk-yuet
said. The bank's
many operations overseas meant its high weighting might not reflect its situation
in Hong Kong. Also, its size as a stock meant it was easier for investors to push
and pull the market according to their fancies, Mr Ho said. "There's
obviously a clash of interest, with a big company dominating the index. The [index]
is used to arbitrage many market derivatives because it is easy to manipulate,"
he said. "Two big companies, HSBC and China Mobile, already make up 40 per
cent of the index, making it more vulnerable to fluctuation. It has lost its representative
status of being a benchmark for investment." While
HSBC alone made up almost a third of the index, it only accounted for 18 per cent
of trading activity in the index, the BOCI study found. The
top five constituent stocks were generally over-represented within the index -
accounting for 63 per cent of the weighting despite having turnover values of
just 58 per cent. "The
over-representation is a serious flaw of the index service. It is quite impossible
for the majority of international investors to allow one particular stock to deviate
significantly from a 10 per cent weighting in their portfolio," the BOCI
report said. Meanwhile,
China stocks were under-represented in the index which excluded H shares despite
the prominence of mainland companies in the market. Mr
Ho said a more balanced approach would be a maximum individual weighting of 15
per cent plus the inclusion of H shares. It would see HSBC's weighting fall to
15 per cent and the top five index constituents' weighting at 46 per cent. The
aggregate weighting of China stocks would be 23 per cent, up 2 per cent. HSI
Services director Vincent Kwan said that the existing index was the best way to
accurately reflect the market. Weighting
market capitalisation meant the index was a microscope on the market, Mr Kwan
said.
12. It’s another Sister Slam
Sunday
Morning Post, 8 September 2002 
13. Monitor
JAKE
VAN DER KAMP, SCMP, 24 September 2002 It
is a strange world indeed when legislator Emily Lau Wai-hing regrets indulging
in freedom of speech and suggests that key public policy issues not be discussed
in public. She
as much as did so last week after the stock market took a brief scare from her
earlier proposal that the Legco secretariat study the linked exchange rate system.
Legislators with
the penny stock debacle still in mind instantly fell over themselves in their
haste to retract their previous support and even she became apologetic for it.
In fact she said
a possible approach for future Legco studies involving market sensitive information
would be to make them available to legislators on a confidential basis and not
to the general public. Yes,
that was Emily Lau, champion of our civil liberties. Would you believe it? Listen,
Emily, there is nothing wrong with you or any other legislator asking whether
we should keep the peg and nothing wrong with society at large debating the question.
If the thing
is so fragile that a little talk will destroy it then it is gone anyway and the
sooner the better in that case. There
are only three people who should restrain themselves in public when talking about
the peg. They are Chief Executive Tung Chee-hwa, Financial Secretary Antony Leung
Kam-chung and Hong Kong Monetary Authority boss Joseph Yam Chi-kwong. And
the reason they should restrain themselves is purely one of executive prudence.
It is they who would have to make the decision if the peg were to be dropped.
If they drop hints in advance that it may go they would invite speculative raids
on the currency, which would either force the issue on them or, at the very least,
destabilise our economy. Their
choices for public commentary are either a statement of firm support for the peg
or an announcement that a new monetary system has been put in place and, since
the first of these would make them liars if it were ever followed by the second,
they are better off to say nothing at all. Their position requires that they speak
with deed, not word, in this matter. But
this is no reason why they should not debate it among themselves or why the rest
of us, legislators included, should not debate it in public. The peg is not an
icon of religion that we blaspheme if we as much as mention its name. If
stock market frights ought to make us shut our mouths, shall we resolve in the
future never again to talk of property prices, war in Iraq, corporate scandal
or the share price of the CyberWok? The peg is an administrative convenience adopted
to ensure a reasonably stable currency after we had proved abject failures in
doing it in other ways. I personally think it is a very strong system, not least
because it restrains Mr Tung and Mr Leung from their penchant for dabbling in
things they do not understand. They cannot print money or monkey with interest
rates while we have it. Let us all rejoice. However,
there may well be circumstances in which we would be better off to drop the peg
and adopt some new arrangement. I cannot think of any just now, that is how good
a system it is, but the last thing any of us should want to do is stop anyone
else, apart from three people, from raising the question and talking about it
openly. That
way would lie certain doom for a city that has become prosperous through a free
market and a respect for civil liberties. Stop
grovelling, Emily. It does not become you to act like just another bought-in Legco
mouse, running and squeaking to its hole for cover. We are more likely to weaken
the peg than strengthen it if we decide that we cannot even debate it in public.
Email Jake van
der Kamp at jakeva@scmp.com.
14. Mini peg panic over . . . for the moment at least
LOUIS
BECKERLING, SCMP, 24 September 2002 An
uneasy calm returned yesterday. The immediate outlook on interest rates - as well
as speculative views on where Hong Kong's dollar is headed - appeared more settled.
Benchmark three-month
Hong Kong interbank offered rate, or Hibor - the rate at which banks lend their
surplus funds to one another - reversed last week's dramatic daily advances and
eased from Friday's high of 1.979 per cent, to 1.949 per cent. On
currency markets, the one-year forward HK dollar rate fell from an unlikely premium
of 230 "pips" above spot rates to which they had spiked on Friday, to
around 150 - representing a forward rate of HK$7.8144 to the US dollar, versus
a spot rate of HK$7.7999. Fresh
from reading those market tea-leaves, the consensus from analysts is that the
latest in a series of mini-panics over the future of Hong Kong's currency peg
appears to be over. For
the moment at least. Adding
weight to that reading was a check on the market for Hong Kong dollar corporate
bonds, which showed they had remained largely insulated from the sudden surge
of static coming from money and exchange rate markets. Had investors in the bonds
of Hong Kong's blue-chip borrowers believed for a moment that the Hong Kong dollar
was in imminent danger of being decoupled from its fixed peg against the US dollar,
they would have dumped their investments in droves. That
did not happen, said Stephen Cheng, UBS Warburg's head of fixed income credit
research for Asia. "There
was no notable widening of the spreads at which Hong Kong credits trade over their
US counterparts," he said. "I think investors realise this is a medium-term
issue that Hong Kong needs to resolve and manage, and credit markets did not react
too negatively to the knee-jerk speculation over the future of the peg."
That speculation
was sparked by two recent events - a research report from an investment bank that
the fixed peg was hampering the integration of the Hong Kong economy with China's;
and news last week that Hong Kong legislative councillors had considered conducting
a review of the peg. A
mistaken international view that the Legislative Council could - and might - be
on the point of scrapping the peg, contributed to the mini run on the currency.
But to put the
ensuing events into context, the 230-point forward premium to which the currency
rose against its spot rate compared with a 6,000-point surge in forward rates
during the Asian financial crisis of 1998. And short-term interest rates - which
have now spiked from 1.7 per cent to 1.97 per cent, compare with a leap in rates
to 17 per cent during the crisis. Tommy
Ong, head of currency trading for DBS in Hong Kong, said the outlook was for the
one-year forward dollar rate to return to trading in its typical range of a premium
of between 50 basis points and 200 basis points above the spot rate; while Hibor
rates were likely to retreat from their present premium of around 15 basis points
above equivalent US rates, to a more typical risk-based premium of 10 basis points.
Edmund Harriss,
investment manager for Investec Asset Management Asia, said market jitters appeared
over. "There
was some speculative forward trading on the currency, and those on the wrong side
of the trades would have been caught - but I doubt there were any large positions
taken," he said. "The fact is the Hong Kong government has huge resources
at its disposal with which to defend the peg, and it has demonstrated that it
is willing to use those resources to do so." But
looking further ahead, several analysts continue to believe that Hong Kong will
ultimately have to abandon the peg - even though this might not happen for at
least five years. In
a weekly research advisory to clients, JP Morgan's Bernhard Eschweiler said while
no break was likely within this period, the market could be underpricing the risk
of a regime change. "Thus, we would choose not to be booking profits opportunistically
at these levels, but look instead to build positions on dips," he wrote.
Echoing this
view, Ron Otsuki, Hong Kong chief executive of asset manager Manulife Funds Direct,
said a decoupling was likely in the next "five to 10 years".
15. Believing in a jet plane
BILL
SAVADOVE, SCMP 24 September 2002 
Just inside the gates
of the Shanghai Aircraft Manufacturing Factory, the Chinese flag flies high over
the main building and a billboard declares "Pursuing No 1". Now
the factory is showing its patriotism in another way - pursuing China's dream
of building its own aeroplane. China's
plans to produce a small regional jet to meet massive demand are finally starting
to take wing. But making the project a commercial success will be difficult, according
to industry officials. It
has been two years since state-owned China Aviation Industry Corp I (AVIC I),
parent of Shanghai Aircraft Manufacturing Factory, announced plans for the ARJ
(advanced regional jet). The
five-billion-yuan project is starting to move forward with recent approval by
the government and a funding grant. According to state media reports, China hopes
to start trial flights of the 70-seater plane by 2005 and begin commercial production
by 2007. AVIC
I has already set up a company to design and produce the plane, drawing on resources
from its plants in the cities of Shanghai, Xian and Shenyang. China
sees the ability to produce its own plane as a matter of national pride. Shanghai
mayor Chen Liangyu has expressed a desire on China's part to reduce dependence
on foreign companies. "China
ought to have its own civil aircraft. Every year we buy so many Boeing and Airbus
planes. At least we can produce a regional jet," he said in a recent interview.
US aircraft giant
Boeing and European consortium Airbus dominate the world market for large passenger
planes. Even
though China boasts the regional jet will be locally made, industry officials
say the project will draw heavily on foreign technology. There
will be no foreign partners - AVIC I has opposed such a move. But it is talking
to several overseas firms about supplying components. The
company was in discussions with General Electric of the United States to supply
engines and Ukrainian aircraft maker Antonov for the fuselage, industry officials
said. AVIC I
officials said the company was also seeking foreign vendors for the plane's avionics
- electronic and electrical devices. "What
is lacking is a foreign partner that acts as a kind of systems integrator to say
how the overall design works. That's something AVIC I feels proud that they can
and should do themselves," an industry official said. But
China's past forays into building planes, even with foreign help, have been failures,
analysts said. The
MA-60, a turboprop built by AVIC I and based on the overhaul of a Russian design,
has fallen far short of its sales target of 50 planes from 2000 to 2005. Tiny
Sichuan Airlines is one of the few domestic carriers which has bought the plane
amid concerns over safety and reliability. In
1998, China quietly scrapped plans to build 20 MD-90 aircraft in a deal with McDonnell
Douglas that was once hailed as a symbol of Sino-US business co-operation. China
originally agreed to build 40 planes, but cut that number in half in a renegotiated
deal in 1994 because of lack of demand. Only two planes, assembled from kits,
were eventually built. In
another widely-trumpeted deal, Airbus and China said in 1996 that they would jointly
build a 100-seat "Asian Express" jet which would become part of the
Airbus family. Disagreements
over technology transfer and the size of the plane caused the project to founder,
even though both sides denied the deal was in trouble as late as 1998. Some
industry officials express concern China wants to build the regional jet for the
wrong reasons, allowing patriotism and pet projects to hold sway over commercial
considerations. "If
you look around the whole spectrum of Chinese industry, every single industry
seems to have a pet project - it's a national pride thing," another industry
executive said. AVIC
I is also keen to make a splash at the Zhuhai Air Show in early November and compete
with sister company AVIC II, which is planning a smaller 50-seater regional jet.
China created
the two companies from the break up of the former Aviation Industries of China
in 1999. Unlike
AVIC I, AVIC II has actively sought a foreign partner for its project. Fairchild
Dornier was on the verge of signing an agreement with AVIC II last year, but disagreement
over terms and the US-German aircraft maker's filing for insolvency scrapped the
deal. Canada's Bombardier also looked at the project, but rejected it. China
has just approved plans for AVIC II and Embraer to assemble the Brazilian firm's
ERJ-145 regional jet from kits. Industry officials said the two were still haggling
over the details, including the size of their stakes and tax concessions. Yet
the potential demand for a regional jet is massive. Boeing
estimates that China will need 450 new regional jets in the next 20 years, driven
by rapid economic growth, increased tourism and the push to develop western regions.
Derek Sadubin,
manager of information services for the Centre for Asia-Pacific Aviation, said:
"Regional aircraft prospects in China are so large that the Chinese government
would like to make sure some of the benefits are retained locally rather than
sending the dollars overseas to foreign manufacturers." China's
homegrown regional jet will be heavily subsidised by the government and strongly
dependent on foreign technology, but some say the project just might fly this
time around despite earlier failures. "It
could be a commercial success in its own right but not immediately," Mr Sadubin
said. "These things do take some time to bear fruit in a commercial sense."
16. Shares weaken as players stay away
David
Wilder, SCMP 24 September 2002 Hong
Kong stocks softened at the start to the week as the laundry list of concerns
showed few signs of shrinking. The
Hang Seng Index fell 13.35 points to close at 9,314.87. "There's
not only deflation in the economy, but deflation in stock valuations too,"
said Mareo Mak Tak-kwong, the research head at Tal Fook Securities. Analysts
said that there was something of a buyers' strike as investors held off picking
up beaten down shares. "The
key is still that we don't see any immediate upside in the stock market and so
people can afford to wait That is the major problem," OSK Asia research head
Alex Wong said. The
paucity of buyers meant that the day's turnover crawled in at a mere HK$3.88 billion
- or about 40 per cent of Citigroup's recent daffy turnover in already thin trading
in New York, according to IIPO Securities director Ryan Fong Yen-hwung. The
brewing diplomatic tug- of-war over the fate of Saddam Hussein's government was
top- ping an extensive list of investor concerns. The shadow of Iraq was hanging
over the market with Cathay Pacific slipping 1.4 per cent There
was a glimmer of hope, however, as investors moved in to lift China Mobile off
its recent lows. However, the mainland mo- bile-phone leader closed up only 0.55
per cent, hardly a cause for celebration for a firm which has lost a third of
its value this year. China Mobile, along with its nearest ~ China Unicorn, has
been sinking before the listing of fixed-line giant China Telecom With
the stock's price-earnings ratio now m the very low ~e digits - a far cry from
the about 30 times earnings that it listed at in 1997 - Mr Mak said it offered
an opportunity for those investors with steely nerves. "I
would imagine the maximum downside should be no more than 10 per cent from here,"
Mr Mak said. The
Chinese private chips presented a mixed bag following last week's heavy falls,
with only Global Bio-chem maldng a concerted effort to claw back the losses caused
by Euro-Asia Agricultural's suspension last Thurs- day. The corn starch play rose
8.6 per cent. Joe Zhang of UBS Warburg - the main cheerleader for the private
chips among the Hong Kong analyst community - defended the sector in a note to
clients after the suspension got the corporate governance alarm bells ringing.
Mr Zhang said
~ the UBSW China Private Chips Index had Wen about 7 per cent since listing 20
months ago. "We
think this is a healthy correction and should serve as a warning to private entrepreneurs
and regulators alike. We expect private chips to come under more scrutiny,"
he said. "However,
it would he wrong to conclude that corporate governance is worse in the private
sector than in the state sector. inadequacies in corporate governance among the
1,100 listed A-share companies are widespread. "In
our view, improving corporate governance will be a long march for Chinese companies
as a whole, not just private sector companies." Key
Figures
Close: 9,314.87 [-13.35]
Turnover: $3.88 bln
Volume:
4.29 bln shares
Day’s hingh: 9,322.36
Day’s low: 9,219.08
Advanced: 250
Declined: 433
Unchanged: 603
September futures: 9,268
[-81]
October futures: 9,265 [-80]
17. Developers' shares slump after slow weekend sales
KENNETH
KO and JON OGDEN, SCMP 24 September 2002 
Major property stocks dipped to multi-year lows yesterday after a further round
of price-cutting failed to lift sales of new residential projects over the holiday
weekend. Investors
and analysts said the latest price cuts showed developers were giving up hope
of a market upturn. "If
everybody is going to slash prices by 15 to 30 per cent it is a sign that developers
are losing confidence," said Vincent Koo, a fund manager with Kingsway Fund
Management. Sun
Hung Kai Properties lost HK$1 to close at HK$43.80, a 12-month low. The stock
has fallen 37.42 per cent since May 3. Cheung
Kong (Holdings) finished 85 cents lower at HK$49.90, its lowest since early 1999.
The stock has declined 35.19 per cent since May 17, although analysts said its
performance was partly attributable to the decline in associate Hutchison Whampoa,
which has been hit by concerns over its exposure to third-generation telephony.
Henderson Land
Development shares fell 45 cents to HK$22.75, a four-year low. They have dropped
40.75 per cent since May 2. Swire
Pacific shed 40 cents to HK$31, a 12-month low, and is down 38.61 per cent since
May 2. New World Development closed 25 cents lower yesterday at HK$4.375, having
fallen 37.5 per cent since May 5. "The
sales response of the newly launched projects is not very good," said Kenny
Tang Sing-hing, associate director at Tung Tai Securities. "Most of the share
prices are trading at deep discounts to [net asset value] but the market is justified
as the outlook is not so strong." HKR
International's Siena Two in Discovery Bay sold only about 40 units last weekend
while New World's Seaview Crescent joint venture in Tung Chung sold about 60 despite
price discounts. Wharf
(Holdings) assistant director Ricky Wong Kwong-yiu said the sale schedule of its
Bellagio project in Sham Tseng would not be affected by the slow responses to
other projects. He
said about 600 potential buyers had registered interest in its project and an
official internal sale would be held soon. During a "soft" launch last
weekend, Wharf sold 15 high-level units at HK$4,000 to HK$4,500 per square foot,
a price Mr Wong described as satisfactory. BNP
Paribas Peregrine head of regional property Adrian Ngan Wai-hung said developers
might slow the pace of new releases but he did not expect any substantial price
cuts. He said property stocks should find some technical support at current levels.
Marco Mak Tak-kwong,
research head at Tai Fook Securities, agreed and said: "It's time to accumulate
the quality property stocks. I just don't believe that the property market in
Hong Kong is dead from here on."
18. HSBC chiefs back currency peg
JAKE
LLOYD-SMITH in Singapore and REUTERS, SCMP 24 September 2002 Top
HSBC executives yesterday came out in support of Hong Kong's fixed currency link
and defended the government's economic management record amid calls for radical
action to reverse the deflationary downturn. HSBC
chairman Sir John Bond and chief executive Aman Mehta said the 19-year-old currency
peg should be maintained, and both welcomed the latest commitment from senior
officials to stick with it. The
move follows last week's Hong Kong dollar sell-off in the wake of aggressive price
discounting by property developers and a proposed Legislative Council report into
the desirability of maintaining the currency board system. Investors
were spooked by a rising tide of negative commentary by leading SAR financial
institutions, including HSBC, on the SAR's economic problems. Last week, a report
from the bank's SAR-based chief economist warned of a cycle of weak investment
and growth causing high unemployment and low productivity. "I
think the Hong Kong dollar peg is a very important part of Hong Kong stability,"
Sir John said in Singapore. "It's
served Hong Kong extremely well since 1983 and I am glad that the financial secretary
and chief executive support the continuance of the Hong Kong dollar link. I think
that is in the best interest of Hong Kong." Addressing
the question of what follows the link, Mr Mehta said a new system depended on
China's yuan becoming a fully convertible currency. "I
think that there is no mood at this moment in time to seriously reconsider the
peg. The time to do so, quite frankly, is only in the good times, when people
have high confidence: that is the time when you could contemplate such a measure,"
Mr Mehta said. "They
[Beijing] could make the renminbi convertible . . . five to six years later is,
I think, the most natural time. But frankly, just peg the Hong Kong dollar to
the renminbi." Mr
Mehta threw his weight behind Chief Executive Tung Chee-hwa's embattled economic
team, saying that they had been unfairly criticised for Hong Kong's lacklustre
economic performance since the handover five years ago. Beijing
policymakers have said that they intend to make the yuan fully convertible, but
have not announced a timetable for liberalising the capital account. However,
there has been no public suggestion from Beijing, that this process could be linked
to reforming Hong Kong's currency board. The
HSBC executives' comments come at a sensitive time. Last
week, news of a proposed study by legislators into the effectiveness of the currency
board system triggered a sharp rise in Hong Kong dollar forward rates but a firm
reaffirmation of the link's importance from the government. The
plan for a study was promptly dropped. Mr
Mehta said that since its introduction in 1983, the currency board had been an
"enormous bedrock of confidence" for Hong Kong, although it had ended
the government's freedom of action in monetary policy. Mr
Mehta said Beijing was likely to make the yuan fully convertible within a decade,
which was likely to drive the debate about whether retaining the US dollar peg
remained in the SAR's best interests. "I
think that it [reconsidering the peg] will relate much more to events in China
than an independent decision made entirely by Hong Kong," Mr Mehta said.
19. In his words
Stella
Lee and Ambrose Leung, SCMP 24 September 2002 On
the Tung administration (September 21):
"This toadying culture wilt
destroy Hong Kong. It means people have to do something that the government likes
and what Beijing likes. We do not know who is really in charge of Hong Kong now.
Many people keep talking, but Tung Chee-hwa remains rather silent." On
religion and Falun Gong (September 21):
"We do not want to see Hong
Kong becoming like any other city in the mainland. If other kinds of freedom are
in danger, we are going to lose religious freedom very soon. So we have to speak
out at once if we see any freedom being jeopardised." On
the right-of-abode issue (September 211:
"He [Mr Tung] never has time
for us. The issue has troubled Hong Kong for so tong, he should have at least
given us a chance to talk about it. It's very bad, 1 am very, very disappointed."
On the ministerial
system (July 13):
"Such an important change should be introduced with
consultation with the people. It seems even high-ranking people are not able to
explain what it's about. It's realty confusing." On
China (April 1999):
"I have frequently noted in China that oppressed
people in turn become oppressors as soon as they are given an opportunity. Everyone
has an instinctive capacity to become an emperor, a tyrant."
20. DOONESBURY by G B Trudeau Cartoon.     
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