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1. Hang Lung fires 300 in hotels revamp

2. Staff to lose jobs as Grand Hotel privatises

3. 'Do nothing' option fuels uncertainty

4. San San in golden farewell to Games

5. Second form of dengue hits SAR

6. Health chiefs in talks on strategy against dengue outbreak

7. Lady Akers-Jones, girl guides' stalwart, loses battle with cancer

8. Planet discovery biggest in 72 years

9. Emirates considers A380 for SAR

10. Shenzhen the greater threat, analyst warns

1. Hang Lung fires 300 in hotels revamp
Dennis Ng, The Standard 9 October 2002

Hang Lung Properties will lay off about 300 staff as the developer plans to convert two hotels into serviced apartments and an office building.

The news came after Hang Lung successfully acquired the hotels from its parent, Hang Lung Group.

Hang Lung Properties said in August it would pay HK$924.3 million to acquire a 73 per cent stake in Grand Hotel Holdings from its parent Hang Lung Group.

Shareholders for both companies approved the transaction yesterday.

Hang Lung Properties, which is 61.06 per cent owned by Hang Lung Group, will now make an all-cash offer of HK$1.84 per A share and 18.4 HK cents per B share to acquire all shares of Grand Hotel Holdings from independent shareholders.

The whole transaction is expected to cost around HK$1.25 billion.

The group plans to convert its hotel in Kornhill, Hong Kong Island, into serviced apartments, while another hotel in Mong Kok is earmarked to become an office tower next year.

Hang Lung Properties executive director Terry Ng said the developer would invest about HK$80 million in renovating the two hotels. Ng said the work would take between six and nine months to complete, with work scheduled to start on January 1. The renovations would add 702,620 square feet of investment properties to Hang Lung Properties' real estate portfolio.

Ng said the company would also continue to shore up its land bank. ``No matter if it is land acquisition or project launches, we'll make our decision according to the market situation,'' he said.

The staff lay-offs would cost the developer about HK$72 million. The 300 staff affected represented half the staff at two major hotels operated by the group's Grand Hotel.

Ng said the group would hold a recruitment day to help the sacked workers find jobs at other hotels.

``We have tried our best for our staff. But in the end, this is a commercial decision.''

2. Staff to lose jobs as Grand Hotel privatises
ANNETTE CHIU, SCMP 9 October 2002

Up to 300 hotel staff will be laid off by the end of the year following approval of the HK$1.25 billion privatisation of Grand Hotel Holdings by minority shareholders in the Hang Lung Group and Hang Lung Properties.

At an extraordinary general meeting yesterday, shareholders of both companies approved the plan under which Hang Lung Properties would acquire parent Hang Lung Group's stake in Grand Hotel for HK$924.4 million. It will make a general offer to Grand Hotel's minority shareholders next week.

Under the plan, Hang Lung Properties will spend HK$70 million to turn Grand Tower Hotel in Mongkok into offices and HK$10 million to convert Grand Plaza Hotel in Quarry Bay into serviced apartments.

Hang Lung Properties' executive director Terry Ng Sze-yuen said half the hotels' staff would lose their jobs and the company was setting aside HK$12 million as compensation.

"Staff affected will get compensation. On top of that, we will pay them an extra one to six months' salary according to seniority."

Hang Lung Group holds 74.09 per cent of the A shares and 69.61 per cent of the B shares in Grand Hotel Holdings. It also owns 61.06 per cent of Hang Lung Properties.

The offer for Grand Hotel is pitched at HK$1.84 per A share and 18.4 HK cents per B share. It represents a 25.1 per cent discount to net asset value, estimated at HK$2.46 per A share and 24.6 cents per B share.

Mr Ng said they were expecting a 7 per cent return from the two hotels.

Both hotels would continue with their operations until December 31 and Hang Lung Properties would help employees find new jobs by holding a recruitment day next month.

Conversion of the hotels will begin on January 1 and take six to nine months to complete. The Mongkok office tower will be put up for lease at the end of this year.

Although rents of prime office buildings had dropped 10 to 20 per cent recently, Mr Ng said there was steady demand for offices in Mongkok.

3. 'Do nothing' option fuels uncertainty
CONCRETE ANALYSIS by NICHOLAS BROOKE, SCMP 9 October 2002

Reaction to my article last week shows many people agree that the administration should not intervene in the process that is taking place in the residential property sector.

I believe this is the final stage of a necessary correction at the end of which the market will find a natural level at which buyer and seller are comfortable doing business and values will be set and driven by the fundamentals of supply, demand, interest rates and the health of the economy.

However, it would appear that the comments of the chief executive and the financial secretary at the recent Forbes Conference, and further statements made by the financial secretary during his recent visit to Los Angeles and Toronto, have raised the expectations of the community.

It would seem they really have dug themselves a hole and regretfully therefore the "do nothing" option may in reality not be open to them and may only add further to the uncertainty they have created.

In other words to do nothing might well be worse than a limited and well conceived damage limitation exercise, provided it could be argued that the measures proposed were of a facilitating nature and designed to improve the efficiency of the market, and to remove conflict, confusion and so enhance the working of the market.

As you will gather, I am not entirely comfortable with the logic or rationale but I sense they may have no choice if they are to maintain credibility.

Accordingly, I have been considering what they might do by way of damage mitigation and it would appear they could announce some short- and medium-term measures, which might ease the pressure on them and which could be viewed positively from an industry perspective and from the point of view of buyers, sellers and lenders:

- The immediate, rather than the phased, retirement of the Home Ownership Scheme, which most agree was needed at the time, but now has largely served its purpose and is competing directly with the private sector.

To a large extent this has already been anticipated by the market, having been addressed in the Chief Secretary's Report published earlier in the year, and it could be seen as being only a case of pressing the button sooner rather than later.

We are in the midst of a sale of several thousand units. Disposal of this particular phase of supply would need to be allowed to work itself through and be completed but plans for sale of future phases on the basis of the criteria and discounts applied under the Home Ownership Scheme would be cancelled.

I understand that this could involve a stock of up to 20,000 units either completed or under construction.

Because the government is keen to revitalise the private rental sector, I would suggest the bulk of these units could be leased on an open-market basis, with a view either to subsequent sale as standing investments or injection into a real-estate investment trust or similar vehicle, the scope for which is under serious consideration by the Securities and Exchange Commission.

The balance of the units could be allocated to the Urban Renewal Authority which, as an alternative to cash compensation, could offer them to owners and tenants who have to be re-housed as a result of one of its urban regeneration initiatives.

- An announcement now that, with effect from the beginning of the next financial year - April 1 - the government will not predetermine which lots of land are to be offered for sale that year either by tender or by auction.

It will rely entirely on the operation of the application list system whereby if there is an appetite/interest in a particular lot, then application is made and if the application is supported by a figure at which the administration would do business, then the lot is released for sale under competitive conditions, with the reserve price underwritten by the applicant. Under my new scenario, the application list would represent a register of all land available for sale and any land within the government portfolio where government would entertain disposal would appear in the application list.

By leaving the choice on timing of release to the market, this would avoid the present criticism that as the government is not an active participant in the market, it should not try and second guess the amount of land the market is capable of absorbing through its auction and tender programme. It should leave it entirely to the forces of supply and demand.

The counter-criticism, of course, will be that the administration is now placing itself and the rate of the future production of housing in the hands of the development community and will that community play the game and warrant and deserve this degree of trust?

My sense is that people will be responsive and responsible to the adoption of the application list system for all land sales, in that they know that, if the administration senses developers are holding back on land purchases as a means of creating future scarcity and pushing up prices, then the administration can easily revert to the present auction and tender arrangements.

- Early dialogue with the major lenders and the Hong Kong Mortgage Corp on how to revitalise the secondary market, which languishes far behind the primary sector, in terms of both volume and value.

Conservative valuations compounded by an ultra-conservative attitude on the part of lenders to anything other than new product, mean that if buyers are serious, they may be faced with having to find up to 50 per cent of the purchase price out of their own pockets, and with meeting all the costs and fees associated with the purchase.

There is no generous or aggressive developer in the secondary market willing to help top up the mortgage, meet stamp duty and legal fees and offer decoration and relocation assistance.

Similarly whereas the Mortgage Corp appears to have little trouble in underwriting, through its insurance scheme, the top-up of mortgages to 85 per cent for new product, there is a markedly different attitude to secondary product, where caution, prudence and a range of other "excuses" are used to complicate the process. Essentially what we need is a change of mind-set. A tried and proven product five to 10 years old could be argued to have less risk than a new unit.

The project has settled down, the builders have moved on, the defects have been rectified, and all the teething troubles associated with a new project have been worked through.

Realistic valuations, a less restrictive attitude to age and a dedicated department at the Mortgage Corp concentrating on helping those who wish to buy in the secondary market are essential to creating a climate which will foster greater transactional activity.

Also, if the government is pursuing the possibility of issuing capital vouchers to help those who meet the necessary criteria, perhaps the first phase of vouchers might only be redeemable against the purchase of secondary property on the basis that as the market recovers, the primary sector, being developer led, is quite capable of helping itself.

What I would not do is tamper with the demand side of the equation, through rebates on stamp duty or a scheme involving tax concessions in relation to mortgage interest.

Both are marginal, complex to administer and would carry less weight than the options identified above. Also, there is talk of suspending the Housing Authority's Tenant Purchase Scheme (TPS) on the basis that these tenants are potential purchasers of units in the private sector. I am not sure that this is the case, as the price differential is significant - three or four to one (private vs TPS).

Also if tenants are not encouraged to buy they will simply stay put, continuing to enjoy the same favourable rent conditions. Why should they move as it still pays to continue renting, even if their rent has been increased as a result of means testing?
Nicholas Brooke is a consultant of property consultancy firm Insignia Brooke.

4. San San in golden farewell to Games
ALVIN SALLAY in Pusan, SCMP 8 October 2002

Golden girl Lee Lai-shan drew the curtain on an illustrious Asian Games career by winning the gold medal in windsurfing yesterday.

"This gold medal is special as this will be the last time that I will be taking part at the Asian Games," San San said after defending the gold she won four years ago in Bangkok.

Three races remain in the women's mistral event but the Hong Kong star is in an unassailable position after eight races, having won six and finished second in two. Hong Kong's fourth gold medal at the Pusan Games will be officially confirmed tomorrow when the regatta ends. But San San and Hong Kong were already celebrating.

"She sailed very well throughout the competition and showed that she has matured well with age," coach Rene Appel said.

"She made it look very easy but a lot of preparation and hard work went into it. To win with three races to spare is unique."

San San said her next goal was to help Hong Kong book a berth at the 2004 Olympics in Athens.

"I will compete at the World Championships in December in Thailand. This is the qualifying event for the next Olympics and I hope to win Hong Kong a place," the reigning world champion said.

However, she refused to say if she would take part in the Athens Olympics. "At the moment, all I'm thinking of is the World Championships.

"I'm relieved to have won here. I'm 32 and most of my competitors these days are in their early 20s. But I proved that experience also counts."

Hong Kong is on target to equal the five gold medals won in Bangkok. The team is confident of adding a further gold in wushu.

5. Second form of dengue hits SAR
ELLA LEE , SCMP 8 October 2002

A second type of dengue fever has been found in Hong Kong for the first time, signalling a more serious threat from the mosquito-borne disease.

The discovery came as the Department of Health recorded two more infections, one local and one imported case, bringing the number of local infections recorded this year to 18 and imported cases to 15.

Health officials revealed yesterday that the serotype two dengue virus was found in a 61-year-old man from Shamshuipo.

The man, surnamed Ko, developed fever on September 25 and was admitted to Caritas Medical Centre on September 29. The man was discharged yesterday.

Dengue fever is a viral illness transmitted by the bite of infected Aedes mosquitoes. The dengue viruses include four serotypes.

Patients of the other 17 local cases in Ma Wan, Cheung Sha Wan and Tsuen Wan were infected with serotype one virus.

Doctors said patients infected with only one type of virus would suffer only mild symptoms such as headache and high fever.

But if they subsequently contracted any other type of dengue virus, they risked developing dengue haemorrhagic fever, a complication that can be fatal.

Dengue haemorrhagic fever kills about 15,000 people every year, according to the World Health Organisation.

The risk is much higher for children under the age of 15.

Deputy Director of Health Leung Pak-yin said yesterday that the chance of having a major dengue fever outbreak in Hong Kong was quite small.

However, with at least two types of virus in Hong Kong, Dr Leung could not rule out the possibility that some patients might catch dengue haemorrhagic fever.

Dr Leung said it was no surprise that Hong Kong had different types of dengue virus because all four serotypes are endemic in neighbouring countries.

"We keep assessing the situation every day, we have never underestimated the spread of the disease," he said.

He said the coming months would be critical, pledging that the government would make every effort at mosquito control.

Dr Leung said no new case had been reported since September 25, indicating the success of the mosquito control campaign over the past two weeks.

He appealed to the public to be wary of mosquito bites and to take care of environmental hygiene.

The new local case confirmed yesterday involved a 17-year-old youth in Ma Wan.

He developed fever, headache, muscle pain and a rash in mid-July and has recovered.

The imported case was a woman, 30, who developed fever, headache and a rash on September 24 and has recovered.

She travelled to a Southeast Asian country during the incubation period.

6. Health chiefs in talks on strategy against dengue outbreak
ELLA LEE, SCMP 8 October 2002

Further action to control dengue fever - including heightening alertness among doctors and introducing more sophisticated tests - will be discussed by health and hygiene officials today.

A powerful government committee, chaired by Permanent Secretary for Health, Welfare and Food Carrie Yau Tsang Ka-lai, was set up last week to tackle the spread of the mosquito-borne disease. It will meet today. Dr Leung Pak-yin, deputy director of health, said yesterday the government was considering if there was a need to test mosquitoes for strains of the dengue virus.

At present, the Food and Environmental Hygiene Department monitors the number and density of mosquitoes in different districts, but there is no test of the type of virus mosquitoes carry.

Dr Leung said the government would monitor if another vector, Aedes aegypti, was found in Hong Kong. Its ability to transmit the virus is even greater than the Aedes albopictus breed of mosquito, responsible for spreading dengue fever in Hong Kong thus far.

Yuen Kwok-yung, chair professor of microbiology at the University of Hong Kong, said public hospitals would soon issue guidelines on the diagnosis of dengue fever to frontline doctors.

Professor Yuen said that because a second type of the virus was found in Hong Kong, doctors needed to be alert for serious complications. For example, patients suffering from bleeding and rashes - symptoms of dengue haemorrhagic fever - should be referred to the Department of Health for blood tests, he said.

The microbiologist agreed that the chance of a major dengue fever outbreak in Hong Kong was low because the weather was becoming cooler and drier.

"It is rather meaningless to trace the source because tens of thousands of people are travelling in and out of Hong Kong every day. Risk reduction, such as reducing the density of mosquitoes and removing stagnant water, is the real issue," he said.

Dengue fever is a major health threat in 100 countries and affects 50 million people a year, killing about 24,000, according to the World Health Organisation.

7. Lady Akers-Jones, girl guides' stalwart, loses battle with cancer
FELIX CHAN, SCMP 8 October 2002

Lady Jane Akers-Jones, the wife of former chief secretary Sir David Akers-Jones and an influential figure in the Hong Kong Girl Guides movement for the past 20 years, has died aged 74.

Lady Akers-Jones, a vice-president of the Hong Kong Girl Guides Association, died on Sunday in Queen Mary Hospital after a two-year battle with cancer. A funeral service will be held at St John's Cathedral on Friday.

Sir David, her husband for 51 years, said yesterday they had worked as a team, with his wife playing the dual role of hostess and secretary.

He said his wife had not been a noisy person but very much loved her life, which had included music and dancing. "She had also liked trekking as well as travelling around the world with me," he said.

Sir David said they had planned to spend more time with their daughter, Bryony, and grand-daughters, Amelia-Jane and Susanna Ruth, in Australia, having lived in Hong Kong for 45 years.

Lady Akers-Jones, who was an actress when she met her husband at Oxford University, was chief commissioner of the Hong Kong Girl Guides Association between 1983 and 1993.

During her years at the helm, two new girl guides groups, Sea Ranger Sea Lion and Golden Guides, were formed.

She also led a tour to Beijing in 1988 to visit local women and youth organisations. The trip resulted in the creation of a member exchange programme between the association and its mainland counterpart.

Dr Alice Lui So Yee-lai, the current chief commissioner, said Lady Akers-Jones was not only her mentor but also a close personal friend. "She was a tower of strength and a model for the girl guides here," she said.

The association plans to send a delegation of more than 100 to attend the funeral service and will also hold its own remembrance ceremony.

8. Planet discovery biggest in 72 years
ASSOCIATED PRESS in Los Angeles, SCMP 8 October 2002

Astronomers have discovered a 10th planet millions of kilometres beyond Pluto, in the biggest find in the solar system since the ninth planet was spotted 72 years ago.

The object is 1,287km across - about a 10th the diameter of Earth - and orbits the sun once every 288 years at a distance of six billion kilometres. It is half Pluto's size but larger than the planet's moon, Charon.

Planetary astronomer Michael Brown of the California Institute of Technology said: ''It's about the size of all the asteroids put together, so this thing is quite big.''

Professor Brown and post-doctoral scholar Chadwick Trujillo discovered the planet in images taken on June 4. They were to announce their discovery yesterday in Birmingham, Alabama, at a meeting of the American Astronomical Society's division of planetary sciences.

The two used a telescope at the Palomar Observatory near San Diego to discover the planet, provisionally dubbed Quaoar, a creation force in California Indian mythology. Follow-up observations with the Hubble Space Telescope confirmed its size.

Professor Brown said archival research showed Quaoar had been captured on film as long ago as 1982, but was never noticed. He and Dr Trujillo went back and pored over the older images to help pin down the circular path it travels around the sun.

''It could easily have been detected 20 years ago, but it wasn't,'' Professor Brown said.

Quaoar lies in the Kuiper Belt, a swarm of objects that orbit the sun beyond Neptune. The objects are considered fossil remnants of the swirling disc of debris that coalesced to form the solar system about five billion years ago. It is also believed to be the source of some comets.

Astronomer David Jewitt, of the University of Hawaii, said: ''This discovery fits in with our expectation that there should be a handful or two of objects as large as Pluto.'' Dr Jewitt, with then-colleague Jane Luu, discovered the first Kuiper Belt object a decade ago.

9. Emirates considers A380 for SAR
RUSSELL BARLING, SCMP 8 October 2002

Hong Kong and Shanghai are likely to be two of the first airports to land Airbus's massive new A380 freighter when it is rolled off the assembly line, according to the director of cargo for Emirates.

Ram Menen, whose company was among the first to commit to the 150-tonne capacity A380 due for delivery in 2008, said the two China hubs were a natural fit for the aircraft.

The company started flying a wet-leased B747-400F to Shanghai late last month, which Mr Menen said was flying out fully loaded.

"If you asked me today where we will start flying the A380 freighter, I would say it will probably replace the 747Fs, but we are still six years away," Mr Menen said.

"Hong Kong would be a definite candidate but a lot depends on the migration of the manufacturing sector."

Mr Menen said the global production shift is such that the technology sector in constantly finding new manufacturing bases with cheaper labour, such as the ongoing repositioning from Shenzhen into the Yangtze River delta.

So the A380's calls in Hong Kong will be contingent upon Shenzhen continuing to be competitive as a manufacturing base.

"We are keeping our potential destinations for the A380 fluid at this point," said Mr Menen. "The good thing about a freighter is you can fly to any airport capable of handling your aircraft. You are not restricted to traditional passenger routes. We are an international conveyor belt, from factories to shelf."

Emirates is unique in that it derives just under 18 per cent of revenue from cargo despite carrying 80 per cent of air freight in the belly of its passenger fleet. Globally, a little under 50 per cent of cargo is carried by freighters.

The Dubai-based airline manages this equation because it does not fly narrow-bodied aircraft; Mr Menen describes its passenger fleet as "freighters in disguise". For example, the B777 passenger jet it flies to Hong Kong can carry, depending on passenger configuration, up to 28 tonnes of freight in its belly. Hong Kong generates about 16 per cent of its global cargo revenue.

Mr Menen said Hong Kong would continue to be a key cargo market for Emirates, but that he wouldn't be surprised if the opening of Baiyun International airport, in Guangzhou, changed the flow of air freight in the region.

"We are very committed to Hong Kong with our freighter and passenger flights but there will definitely be opportunities at Baiyun when it opens next year," he said.

"A this point in time Guangzhou really make sense for us because a lot of that region's cargo comes through Hong Kong.

"Most of the cargo that comes from the Guangzhou area is actually controlled by freight forwarders in Hong Kong," he said. "But with Baiyun opening next year, and China Southern looking seriously to get into the freight market, I think you will see a few shifts in the structure of the market."

For Emirates, though, it will be one step at a time on the mainland.

"Our plans for China are big, but at the same time we are just in the process of building up the market," Mr Menen said. "So we want to get comfortable first in Shanghai."

As the former president of The International Air Cargo Association, the world's biggest organisation dedicated solely to the transport of air freight, Mr Menen has more than a passing interest in the security initiatives enveloping the industry since 911.

He said the industry, particularly in the US, was going through a steep learning curve, one which Emirates, as an airline based in the security-conscious Middle East, has experience with.

"What is happening in the US at the moment is they are going from virtually nothing to the other extreme. The directives swing like a pendulum - one day they want to ban all belly freight - the next day its okay again," he said.

"The good thing is that there is now consultation going on in the industry and whatever comes out will be best practice.

" But whatever is decided can not bring commerce grinding to a halt."

10. Shenzhen the greater threat, analyst warns
PEGGY SITO, SCMP 8 October 2002

While many in Hong Kong are worried about growing competition from Shanghai, another threat to the SAR's economy is right next door, a Salomon Smith Barney analyst has warned.

Through the efforts of the central and local governments over the past 20 years, Shenzhen had established a strong economy, reflected in its growing financial sector, shipping industry and high-technology industries, senior economist Huang Yiping said.

The city achieved gross domestic product of 190 billion yuan (about HK$178.08 billion) last year, the fourth-largest in China. Per-capita GDP reached US$5,400, the highest in the country.

Compared with Hong Kong, the special economic zone has the advantage of close ties with the entire Chinese economy without any boundary restrictions, Mr Huang said. The zone also boasts low labour costs, just a quarter of the SAR's.

"Many people in Hong Kong are worried about Shanghai's rapid rise in recent years," Mr Huang said. "They probably should worry more about Shenzhen, which has already put significant pressure on the Hong Kong economy, particularly its retail, shipping and housing sectors."

Comparable Hong Kong properties were priced at about three times of those in Shenzhen. That had led to a substitution effect, though the magnitude was not large because of border crossing inconvenience and concerns about schooling, medical care and public security, he said.

He warned that service quality in the shipping and retailing sectors was improving while the catching-up process would probably occur in the financial markets, too.

"While Shenzhen is unlikely to challenge Hong Kong's position as an international financial centre, competition should become fierce soon as China relaxes its capital-account controls," Mr Huang said.

"The biggest race is who becomes the economic centre for South China - Hong Kong or Shenzhen.

"If Hong Kong keeps all of its restrictions towards the mainland, Shenzhen is likely to win the game."

Mr Huang said the SAR was facing a dilemma over whether it should quickly integrate with Shenzhen, which would involve the lifting of boundary controls.

"If it integrates into China rapidly, the required structural adjustments would be very dramatic. And if it doesn't integrate further, it will probably lose an important source of growth," he said.

Hong Kong's high income level, about 15 times China's average, had reduced the SAR's competitiveness, the economist said.

Hong Kong's advantages were its well-established and transparent legal and policy systems, Mr Huang said.

"It is thus important to keep its free market institutions, sound legal framework and high-quality international-oriented services," he said.