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1. Demand for executives falls again

2. Retreat signalled on housing policy

3. Debt-laden Lai Sun in the crunch

1. Demand for executives falls again
Staff reporter, The Standard 12 November 2002

Executive demand continued to fall last month and there is little prospect of a pick-up before next year.

Continued concern about the possibility of a war against Iraq, lack of corporate spending and little job creation weighed heavily on executive demand, recruitment firm EL Consult Hong Kong said.

According to its latest EL Index, overall demand for executives fell 5per cent in October from September.

Despite government figures showing unemployment fell in September, EL Consult principal Alfred Chown said little relief was expected for the executive ranks.

``Recruitment activity is being kept to a minimum as 2002 draws to an end and ahead of the preparation of budgets for next year,'' Chown said.

Moreover, the Hong Kong Government's deepening budget deficit may lead to new taxes and cuts in public spending, negatively impacting on local consumer spending and sounding the death-knell for many small to medium-sized enterprises, he said.

Chown said the EL Index, which tracks monthly demand for executives across key sectors, is unlikely to see any relevant increase for the remainder of this year.

However, recruitment remains quite buoyant for more junior executives in China-based ventures.

``Whereas once these positions were considered more frontier-type executive positions, they are now viewed as vacancies at established China businesses,'' Chown said.

He said a growing number of out-of-work executives were resorting to contract work.

Demand for finance executives fell 7 per cent last month compared with September but some recruitment activity was recorded at private banking and insurance companies. Chown is also seeing demand for financial control and corporate governance executives as tighter regulations are enforced after the accounting scandals in the United States.

Engineering executives are no better off, with a 9 per cent drop in October from a month earlier and an outlook that remains mixed.

Adding to the downside, Chown said government cost-cutting measures to curb the widening budget deficit may impact on new infrastructure developments.

Private property developments are also scaling back new ventures as consumer confidence declines due to rising unemployment.

``Any merger between the MTRC and the KCRC would also trigger more job losses in the engineering sector,'' he said.

In the information technology (IT) sector, the small rise in demand recorded in the previous EL Index could not be sustained and demand fell 17 per cent last month.

Chown said predictions of a recovery in IT spending have now been pushed back until the second half of next year, a delay that is likely to force more IT executives into freelance and project-oriented work.

2. Retreat signalled on housing policy
POLITICAL STAFF, SCMP 12 November 2002

After repeated criticism of its property policy, the government is poised to give its strongest message yet that it wants to pull out of the market.

A decision could be announced today after the Executive Council meets.

While putting a halt to land sales in the next five months was a foregone conclusion, a source said there had been a debate at internal government meetings about whether land applications by private developers should also be suspended.

Four pieces of land originally planned to be auctioned in the current fiscal year will go back to the land bank.

The source said: "It will be a major morale booster that shows strong government determination to stabilise the market. After all, there are very few developers who are taking the initiative to apply for land. Terminating land applications makes little substantive impact. But it will bolster confidence."

It is also understood the government might formally drop the long-term housing target of providing 85,000 flats a year. Officials are adamant it is unnecessary to set such a target.

The subsidised Home Ownership Scheme is also expected to be scrapped. Flats under construction will be sold gradually to avoid disrupting the market.

Officials said the government was determined to keep its intervention to a minimum to counter claims that it has damaged the housing market.

Sources said Exco had initially discussed the package of measures in a meeting last week, but no decision had been taken.

One of the sources said increasing public concerns about the property market had prompted the government to act.

"It's been discussed for a long time," he said. "Almost all options have been raised and digested by the public. Officials may feel the need to come up with some even stronger measures."

Another source, however, indicated land applications might not be suspended because such initiatives came from private developers. "If they see a good time to buy, I don't think the government should stop them."

Expectations of another dose of measures to help property prices were raised after Chief Executive Tung Chee-hwa said last month he would like to see prices rising "a little bit".

He and the Financial Secretary, Antony Leung Kam-chung, have warned of damage to the economy if prices keep falling.

3. Debt-laden Lai Sun in the crunch
LOUIS BECKERLING, SCMP 12 November 2002

Debt-laden property developer Lai Sun Development has seven weeks to find about HK$6 billion to repay its bankers and bondholders by a December 31 deadline.

Either that or the group's creditors will have to agree to further postpone the company's debt repayments, to give Lai Sun the breathing space it will need to raise cash from further asset sales.

This bleak picture for the owner - or former part-owner - of such properties as the Furama Hotel, the Crocodile clothing brand and Hong Kong's Asia Television emerged in the group's annual report, released at the weekend.

The report showed that the property flagship of the Lim Por-yen family now had just HK$238.38 million in ready cash to meet its looming liabilities, after turning in a full-year loss of HK$1.94 billion compared with a loss of HK$1.19 billion the year before.

The group - managed by chairman Peter Lam Kin-ngok - remained confident that talks with its bankers and bondholders would produce agreement on restructuring the debt.

"We will keep all shareholders promptly informed of future developments on this front, and we are extremely hopeful that the conclusion of this restructuring exercise will result in a substantial improvement in the shareholders' value of the group," it said.

But the group's own auditors, Ernst & Young, do not share Lai Sun's confidence.

In a qualification to its audit report published with the results, Ernst & Young said the financial statements had been prepared on a going concern basis.

But it added that the validity of this assumption "depends on the success in securing the agreement of the exchangeable bondholders, the convertible bondholders, eSun [an associate to whom Lai Sun owes HK$1.5 billion] and the banks to the new restructuring plan and the refinancing arrangements, together with the continued success of the orderly disposal of certain group assets to generate additional positive cash flow".

There was "significant uncertainty", Ernst & Young cautioned, as to whether creditors would agree to wait any longer for their money, or whether the asset sell-off would raise the needed cash.

Undeterred, Lai Sun took another step towards convincing its creditors to be patient yesterday by announcing that it had agreed to sell its remaining 32.75 per cent stake in Asia Television to the TV operator's chief executive, Chan Wing-kee, for HK$360 million.

But it has a long way to go in its cash-raising disposals.

As of July 31, consolidated bank and other borrowings - including a loan of HK$1.5 billion from associate eSun - along with bonds issued by the group, amounted to HK$7.14 billion, of which HK$6.19 billion were liabilities due by the end of the year.

Earlier negotiations with bondholders saw repayments deferred to December 31 this year. The group's principal banks also agreed to hold off principal repayments to the same date.

But the bond repayments and the bulk of Lai Sun's bank debt are now due on December 31, and all the group can hope for is that its creditors will be persuaded by the argument that it has enough assets to sell to raise the necessary cash - including investment properties on its books at a value of HK$4.98 billion.

Lai Sun's woes stem from the purchase of the former Furama Hotel at the height of the property boom in 1997, which cost nearly HK$7 billion.

Market talk yesterday was that the Bank of China was heavily exposed, but informed sources told the South China Morning Post a loan from the Bank of China's Hong Kong branch before the company's restructuring had been repaid and the remaining exposure to Lai Sun was "not significant".

Citibank was also cited as a big lender, but a bank spokesman said yesterday it did not comment on its customers' affairs.