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1. Hopewell may spin-off roads to fund bridge

2. China ferry plan for Tuen Mun

3. Rescue package makes muted impact

4. Housing rescue package reduces government influence

1. Hopewell may spin-off roads to fund bridge
Staff reporter, The Standard 26 November 2002

Hopewell Holdings may spin-off its mainland toll roads and other infrastructure business in Hong Kong as soon as the first quarter next year, market sources said.

The infrastructure and property developer would use part of the proceeds to fund a controversial HK$15 billion bridge linking Hong Kong with Macau and Zhuhai, a media report quoted sources as saying yesterday.

No offer size was mentioned.

Hopewell has hired United States investment bank Salomon Smith Barney as the listing sponsor to arrange the share sale, it said.

Both Hopewell and Salomon declined to comment on the report yesterday. Analysts were generally optimistic about a spin-off, saying it would improve Hopewell's bottom line.

``It will be positive for Hopewell if it can successfully spin-off its mainland infrastructure projects such as toll roads,'' South China Securities analyst Jeff Yau said.

``It will offer a good opportunity for the firm to cash out of projects which have been growing at a stable pace in the past few years.''

Toll roads are Hopewell's core business in the mainland and accounted for 71 per cent of its earnings last year.

The highway network comprises five roads totalling 360 kilometres spanning the Pearl River Delta region, with the Guangzhou-Shenzhen superhighway being its flagship toll road. Mainland joint venture toll roads contributed HK$516 million in revenue for the year to the end of June last year, a 110 per cent increase over the previous year.

Total toll revenue from the Guangzhou-Shenzhen superhighway topped 1.89 billion yuan (HK$1.78 billion), a 7 per cent increase, for the same period.

The report also said Hopewell might inject its possible stake in the proposed 28-kilometre Hong Kong-Macau-Zhuhai bridge into its upcoming listing unit.

The bridge plan, which sparked a row between Hopewell and Hutchison Whampoa earlier this year, is yet to receive the go-ahead from the administration, although political leaders including Chief Executive Tung Chee-hwa and Financial Secretary Antony Leung have spoken positively about the value of such a bridge in recent weeks.

Shares of Hopewell rose for a second day in a row yesterday, closing up 0.98 per cent at HK$5.15.

2. China ferry plan for Tuen Mun
Dennis Ng, The Standard 26 November 2002

The government plans to set up a third cross-border passenger ferry terminal in Tuen Mun.

``If there is positive response to the invitation for expressions of interest and everything goes smoothly, we intend to conduct an open tender exercise in the first half of next year to select the operators,'' a government spokesman said.

The government yesterday invited expressions of interest and preliminary proposals to use the existing domestic ferry pier at Tuen Mun to operate the services.

``We had received proposals from the private sector to convert the Tuen Mun pier to a cross-boundary passenger ferry terminal and operate ferry services to Macau and other cities in the Pearl River Delta region,'' the spokesman said.

Hong Kong has two cross-border terminals, in Sheung Wan and Tsim Sha Tsui, which last year had a combined throughput of 17.9 million passengers, representing an average utilisation rate of 68 per cent.

The Airport Authority is planning to open a cross-border terminal at Chek Lap Kok to link up with Macau and cities in the Pearl River Delta, according to a government document.

Phase one development of the terminal would serve air transit passengers, while the second phase would be for non-transit passengers.

The spokesman said the proposed Tuen Mun terminal would be convenient for residents in the New Territories.

``However, we have to be prudent in spending resources in view of the current financial situation,'' he said.

The government will consider granting the selected operator the right to operate services for five years, with a possible extension.

The Tuen Mun pier was completed in 1986 and has four berths, one of which is used for services to and from Chek Lap Kok.

The other three berths could be made available for cross-border services after pier modification works are carried out to accommodate border control facilities.

Interested parties must submit submissions to the Marine Department by 5pm on December 30.

3. Rescue package makes muted impact
SOPHIA WONG, SCMP 27 November 2002

Oversupply continues to weigh on the private residential market, though evidence points to a pick-up in sales after the government unveiled its package of market-support measures.

Analysts expect prices to fall further in the coming year as economic uncertainties keep buying sentiment cautious.

Morgan Stanley Dean Witter analyst Kenny Tse said prices could decline 5 per cent in the next six to nine months, given the record number of units launched but unsold. The investment bank estimated that 27,000 units would be completed per year in the next three years.

Mr Tse said 27,000 units were in line with this year's primary absorption level, and that the number of residential completions should be sufficient until 2005.

"The government's freeze on land sales should temporarily remove 12,000 units of supply. But it's still too early to forecast a supply shortfall in 2006," he said.

Even with land sales suspended, developers could acquire land through land-use conversion and lease modifications, he noted.

Mr Tse said the current mismatch of supply and demand could take 12 to 15 months to correct.

In the meantime, Kowloon residential prices would probably come under heavy pressure, he said. New supply in the district was expected to climb to 10,000 units in each of the next three years, compared with the 15-year average of 4,800 units.

HSBC Securities analyst Derek Cheung said market sentiment had improved following the introduction of the government's stabilisation measures, causing primary sales volume to increase.

"The market's confidence can be built up gradually. By late 2003 or early 2004, supply and demand equilibrium can be achieved," he said.

Some developers were stepping up efforts to unload remaining units by offering buyers additional perks that were tantamount to minor discounts.

Mr Cheung described these as marketing gimmicks and not an indication that developers lacked confidence in the market.

"Most of the developers have stronger pricing power now because their holding cost is low, the government's attitude [to housing policy] has changed radically, land sales have stopped and supply is gradually being eliminated," the analyst said.

There would be about 64,000 units of new supply available for sale in the coming year, compared with annual demand of 20,000 to 30,000 units.

But that level of new supply would decrease because developers had slowed the rate of new releases, he said.

Macey Ho Mei-sze, associate director of Asia Pacific Properties, said it was too early to talk about recovery because there had been no big increase in the volume of secondary market transactions.

"The housing measures will last for only 14 months. The government did not set a timetable to review the effects of the new policy," she said.

Wharf (Holdings) assistant director Ricky Wong Kwong-yiu said the positive impact of the new housing policy had been evident at Sorrento phase two at Kowloon Station.

About 190 units in the project were snapped up within days of the government's announcement, he said. Wharf reaped about HK$1.3 billion in sales.

"The market response was good as the average price per unit was HK$7 million. The buyers are mainly up-graders, with some investors," he said.

4. Housing rescue package reduces government influence
JAMES LEE, SCMP 27 November 2002

In the two decades prior to 1997, Hong Kong was always in a bizarre kind of social balance. At one end, there were a few extremely wealthy property developers manipulating the housing market and increasing their profits.

Then there was the middle class, who worked hard so they could become homeowners. By and large they were content. There was general concern about rising property prices, but at home, people's sole concern was how much more their flats would appreciate.

At the other end, the working class was quite happy with the low rent in public housing. With a robust economy, a good job and savings, some even managed to invest in private property and became social renters and private landlords at the same time.

Ironically, the hinge that maintained this strange balance had little to do with social goals or political ideals. It was all about quick money and widespread anticipation that property investment was the only hope for Hong Kong people.

However, since the Asian financial crisis of 1997-98, this strange social balance has been upset. Developers, dissatisfied with housing market performance, are now blaming their reduced profits on the government's Home Ownership Scheme, failing to point out that private sector home ownership controls three times more of the market share than the scheme.

Middle-class homeowners, originally so content with their ever-appreciating asset, now find that their property's value has dropped by up to 65 per cent. They feel betrayed by the market and have been stunned by the government's failure to do anything about it. But their grievances are nothing compared to the 70,000-plus households who are in negative equity. They are now the unhappiest group in society, desperate, deeply hurt and helpless.

The latest government ''salvage plan'', which includes drastic moves such as the scrapping of the Home Ownership Scheme and the Tenant Purchase Scheme, means public tenants will become another disgruntled group.

Can the rescue plan work? In the short term, the market might go up a little. In the long run, it is anyone's guess. Realistically, anyone knows that a housing market rebound in Hong Kong will have much to do with the steadiness of the world economy in the next two years. A short-term increase in local housing demand will not have much effect in boosting the overall economy.

What is more worrying, however, is the damage done by the rescue plan to our long-term housing policy, particularly in relation to the scrapping of the Home Ownership Scheme, which is a political sacrifice writ large. In the last two years, reality has been distorted by developers' successful propaganda campaigns. The Home Ownership Scheme has been portrayed as the culprit for a downtrodden property market, while in fact the market was dragged down much more by people's lack of confidence and the government's inability to maintain stability. By killing the scheme, officials effectively amputated the strong arm of a long established housing institution - one that has a proven record of success (keen demand), a high level of sustainability (revenue generating) and furthermore, has the potential to act as a cushioning institution to combat future housing market irrationality.

In any modern metropolis, we know that housing is not just about ''bricks and mortar''. Urban housing is always about politics and power. To appreciate the nature of Hong Kong's housing politics better, perhaps it might be useful to quote from the memoirs of former governor Chris Patten. He admitted that the ''greatest failings [of the colonial government] in the social field was in housing and that perhaps the problems encountered were in the short term insuperable. We allocated more money to the Housing Authority and it continues to build more than 100 flats a day, yet the price of home ownership remained extremely high.

''Housing was the area of Hong Kong's life where market forces had the least chance to operate. We suffered from the worst eccentrically combined effects of monopoly capitalism and municipal socialism ... Any convincing attack on the monopoly effectively enjoyed by a few extremely rich property developers in Hong Kong, making grotesquely large profits, could have a serious effect on market confidence at a sensitive time''.

While we do not condone the misgivings of the colonial government in failing to act appropriately in housing policy, it is useful to learn that Mr Patten was fully aware of the existence of an insurmountable structural defect in the housing market. Although the government holds strongly to the free market view, there has never been any open admission that the housing market was and still is defective.

The free market cannot be left ''free'' because in some cases it does not work properly. Capitalism without proper regulation is like an untamed beast. If the government is aiming to distance itself from the market by sacrificing some of its well-founded institutions, it amounts to allowing the market to fall back into the structural gap.

If the Housing Authority can claim any credit for its work in the past two decades, it is in the setting up of a mature public housing institution capable of regulating market irrationality from time to time. By killing off the Home Ownership Scheme and other policies, the salvage plan further shrinks the government's influence in the housing market, leaving us further from a vital social balance. Housing policy is now further adrift. Is it not too high a price to pay for a few more dollars?

James Lee is an associate professor at the City University of Hong Kong.