News Stories:

Click-on these handy "jump links" to quickly access the news item
you're looking for.

1. $1.41b renewal planned at two sites in Tai Kok Tsui

2. Dynamic Star unveils 'low' hub density

3. Developer's futuristic design ready to tackle the elements

4. Taller than the Eiffel Tower, world's highest bridge opens

5. $1.4b facelift planned for bed-space slum area

6. Premiums put squeeze on profits

7. KCRC to boost shopping space at railway stations

8. Property prices hit by Hunghom plans

9. Bold pricing puts houses near the border into luxury league

10. Season is warming up for big projects

11. Project design offers little room to manoeuvre

12. Reit at head of protest parade

13. Paul Y-ITC sells stake in Downer for $1.51b

14. Fare war looms as Jetstar Asia flies cut-price from Singapore

15. Oracle gets down to business of ruling the world

16. Symantec in Talks to buy Veritas

17. Mosquito control measures to tighten

1. $1.41b renewal planned at two sites in Tai Kok Tsui
Emily Tang, The Standard 15 December 2004

The Urban Renewal Authority (URA) will spend HK$1.41 billion on two redevelopment projects in Tai Kok Tsui in Kowloon with nearly half that amount going to compensate existing owners, it was announced on Tuesday.

The two sites, in Larch Street and Pine Street and occupying areas of 23,700 square feet and 24,700 sq ft respectively, are expected to yield a gross floor area of 361,700 sq ft for residential use.

The Pine Street project will also provide an open space of 4,300 sq ft.

URA district development director Joseph Lee said the improving property market has driven up acquisition costs.

He also said he cannot be certain whether the projects will end up with a profit or loss.

The two projects, among 25 on the priority list of the authority's five-year corporate plan, are expected to be completed in 2011.

Lee said compensation and re-housing for property owners and tenants will cost approximately HK$660 mill-ion, about 47 per cent of the amount the authority is prepared to spend on the projects.

There are 24 buildings in the redevelopment areas involving 358 property interests, external relations general manager Eddie So said. About 1,400 residents will be affected.

The authority will make compensation offers to owners and tenants early next year, he said. Compensation for individual shop tenants will depend on the nature of their business.

Six briefings will explain acquisition policies.

Since the exact number of occupants in the neighbourhood is not known, the authority on Tuesday sent out a team of 130 officers to conduct surveys and confirm the number of affected households.

The authority said most of the buildings were built in the 1960s and may not be in a good condition.

Two other redevelopment projects in Cherry Street and Bedford Road in Tai Kok Tsui began in 2002 and 2003 respectively.

Some residents welcomed the redevelopment projects.

A 61-year-old security guard sur-named Chan who earns HK$4,800 a month said he pays HK$550 rent for a partitioned flat and has been waiting a long time for the redevelopment.

The 800 sq foot flat he shares with 12 other tenants is not in good condition, he said.

Chan's landlord, who gave his name only as Hui, owns several flats in the neighbourhood and also welcomes the plan.

He said he will use the compensation money to buy new flats for rent.

However, another tenant who repairs watches in a small shop, fears he may lose his regular customers if he moves to another district.

2. Dynamic Star unveils 'low' hub density
MARTIN WONG, SCMP 15 December 2004

Shortlisted West Kowloon contender Dynamic Star International yesterday said its planned development density for the cultural hub was only fractionally higher than the government's original plan.

Cheung Kong (Holdings) vice-chairman Victor Li Tzar-kuoi said the plot ratio for the consortium's scheme was 1.861, compared with the government's 1.81. It was the first time the joint venture, which also includes Sun Hung Kai Properties, had given a plot ratio, the formula that calculates residential and commercial floor area against the site's total area.

The figure was well below previous estimates for the Dynamic Star proposal of 3.28, and those of rival bidders. Mr Li said the only development under the canopy would be a hotel, representing a plot ratio of 0.232. Outside the canopy, high-rise blocks and serviced apartments would account for a 1.629 plot ratio.

"The total plot ratio is only 1.861," Mr Li said, adding that the figure for neighbouring areas ranged from 10 for residential sites to 15 for commercial sites. "We have offered 50 per cent more area for arts and culture facilities than the government demanded. We have offered 30 hectares for an outdoor open square and green belt."

He said the consortium was still open-minded about changing the plot ratio and was willing to "be a good listener" to public opinion.

Secretary for Housing, Planning and Lands Michael Suen Ming-yeung said last week that property developments on the 40-hectare site should be kept to a low level.

Sunny Development has proposed a plot ratio of 4.3 and bid rival World City Cultural Park 2.5.

Mr Li also announced a partnership with the newly formed Xiqu Development Centre, chaired by veteran performer Liza Wong Ming-chuen, to promote Chinese Opera. He said two theatres, one with 1,000 seats and another with 400 seats, would be built.

Meanwhile the Pompidou Centre has insisted it enjoys "a long-standing friendly relationship" with the US-based Guggenheim Foundation, despite reports of souring ties over the West Kowloon project.

"The Centre Pompidou is fully committed to the West Kowloon scheme and to the joint venture Dynamic Star, which the Guggenheim is also a part," Bruno Racine, chairman of the Paris-based institute, said.

"We are ready to explore all options to ensure that the project is a great success and that the people of Hong Kong secure a cultural hub of which they can be very proud."

The two have been thrown together by the joint venture after earlier forming separate partnerships.

Mr Racine said that the "friendly relationship" with the Guggenheim was illustrated by their joint initiatives.

3. Developer's futuristic design ready to tackle the elements
ANDY CHENG, SCMP 15 December 2004

A typhoon-proof canopy designed to capture rainwater is a key part of the latest proposal for the West Kowloon cultural hub, unveiled yesterday.

Architectural specialists from the World City Cultural Park, a subsidiary of Henderson Land, briefed the press on the construction details of its proposal - in the lead-up to the public consultation period that begins tomorrow.

David Dumigan, deputy project director of World City Cultural Park, said the design of the canopy had taken into account more than 50 years of typhoons in the region.

The canopy would be made of PTFE, a strong, lightweight material developed by Kajima of Japan. Under the proposal, digital art would be projected onto the roof.

Mr Dumigan said the canopy would be built first, followed by the buildings underneath, including the theatres and museums.

"We [would] build the canopy from the north edge and work towards the south because we want to start the theatre complex underneath first, so that we can get it finished on time by early 2011," Mr Dumigan said.

Rainwater collected from the canopy would be used for sanitation and plant irrigation.

Henderson Land vice-chairman Colin Lam Ko-yin said there was room to adjust the consortium's suggested 2.5 plot ratio because the property price had risen recently. He said the original ratio was formulated when property prices were low.

The plot ratio is the ratio of commercial and residential floor space to the site's total area.

But Mr Lam said the project would be difficult to plan if it was operating at the plot ratio of 1.81 set by the government.

The 1.4km-long, 0.5km-wide canopy, designed to withstand typhoons, had passed laboratory tests, said Leslie Robertson, who is responsible for its structural design.

Mr Robertson was previously involved in the design of the World Trade Centre in New York and the Bank of China Tower in Hong Kong.

An international advisory council of 23 art experts has been formed to advise the consortium on its arts and cultural facilities.

A major feature of the cultural facilities is an area measuring about half a million square feet dedicated to young local artists.

Mr Lam said: "The area, not being set for a specific use at the moment, could be used to hold free lectures, rehearsals and seminars for young local artists."

He also said its four museums - with themes of modern art, ink, design and moving images - would emphasise the work of local artists.

The proposal includes three theatres with capacities of 2,120, 810 and 408 seats, and an 11,142-seat performance venue.

Mr Lam said a fund to nurture young local artists, through rental support and start-up classes, would be established if his consortium was granted the 30-year contract to manage the ambitious West Kowloon project.

4. Taller than the Eiffel Tower, world's highest bridge opens
REUTERS and AGENCE FRANCE-PRESSE in Millau, SCMP 15 December 2004

President Jacques Chirac opened the world's highest bridge yesterday, a creation taller than the Eiffel Tower, longer than the Champs Elysees and built to end a traffic bottleneck in southern France.

Conceived by British architect Lord Foster, the white viaduct in the picturesque Tarn Valley will provide a motorway link between Paris and the Spanish border, easing congestion in the Rhone valley. Mr Chirac hailed the viaduct as a "marvel of art and architecture", a monument to French engineering genius that was a "miracle of equilibrium" and projected a bold, successful, modern image.

The highest of the bridge's seven concrete pillars stands at 343m, 19m higher than the Eiffel Tower. At almost 2.5km, it is longer than the Champs Elysees and slightly curved to afford drivers a dramatic view of the surrounding countryside and the ancient town of Millau.

The viaduct is not only the tallest in the world - outstripping the 282m towers of the Akashi Kaikyo bridge in Japan - it is also the longest cable-stayed bridge. The highest bridge in the world is the Royal Gorge Bridge in Colorado, which is 320m above the Arkansas River. "The whole thing looks impossibly delicate," Lord Foster said. He called the bridge his "sculpture in the landscape", a 394-million-euro ($4 billion) project financed by construction firm Eiffage.

The engineering feat has drawn praise for its elegant lines, which allow it to blend seamlessly into the surrounding region famed for its gorges and medieval villages.

"A work of man must fuse with nature. The bridge could not look as if it had been tacked onto the scenery. It had to rise out of the landscape with the delicacy of a butterfly," Lord Foster said.

The bridge will open to traffic at midnight on Friday and is expected to channel an average of 10,000 vehicles per day, with peaks of 25,000 during the summer holidays.

French construction company Eiffage will charge a toll of 4.60 euros in the low season and 6.50 euros in July and August for cars using the bridge, part of the A75 motorway linking the cities of Clermont-Ferrand to Beziers. Lorries will pay 19 euros.

Eiffage has a 75-year concession to operate the viaduct and has guaranteed it for 120 years.

5. $1.4b facelift planned for bed-space slum area
KRISTINE KWOK, SCMP 15 December 2004

Two redevelopment projects costing $1.41 billion were launched yesterday in a bid to speed up the face-lift of dilapidated Tai Kok Tsui.

The Urban Renewal Authority projects - between Larch and Fir streets and Pine and Anchor streets - are expected to affectt 1,400 people, many of them now living in cramped bed spaces.

Twenty-four buildings with a total of 358 property interests will be torn down.

The authority's building and rehabilitation co-ordinator, Joseph Lee King-chi, said the authority would allocate $660 million, or 47 per cent of the earmarked funds, to compensate owners and tenants.

General manager for external affairs Eddie So Shuen-yee admitted rising property prices would mean higher compensation but said redeveloping the district remained the authority's top priority.

"There might be a risk in these projects as the cost will be higher, but the URA is not a property developer," Mr So said. "Profit comes second to our redevelopment mission ... We hope to bring a new face to Tai Kok Tsui."

Tai Kok Tsui is one of the authority's nine target areas in the city.

Two other redevelopment projects have already begun in Tai Kok Tsui -in Cherry Street and in Bedford Road.

Though most of the buildings in the latest projects are more than 40 years old, owner-occupiers will be offered a home purchase allowance based on the value of a notional seven-year-old flat in a similar district.

Mr Lee said the compensation would be as close to market price as possible.

Mr So said that since most of the affected buildings housed bed-space apartments for single men working nearby, the authority would either help move eligible tenants to public housing estates or offer them compensation of up to $70,000.

Bed-space tenant Chan Sau welcomed the redevelopment plan because the Pine Street apartment he stays in is rundown.

"There are 13 sharing an apartment now," said Mr Chan, who has been living in Pine Street for eight years.

"It's not very hygienic. And it's very packed. If a fire breaks out, we can't escape in time."

But Mr Chan said he would rather rent another bed space in the same district than move to a public housing estate because it was closer to work.

Cheung Su-fun, who bought a shop for about $1 million on Ivy Street 10 years ago, said she would have to close her store if the building was torn down.

"It's very expensive to rent a shop now, and the compensation would not be enough for us to buy another one," she said.

6. Premiums put squeeze on profits
NG KANG-CHUNG and PEGGY SITO, SCMP 15 December 2004

The government has squeezed the profit margins it allows developers in its assessment of land premiums as property prices rise and political pressure mounts after the Hunghom Peninsula fiasco.

Surveyors said government valuers had cut the profit margin that it assumes when valuing land sold to developers to as low as 10 per cent, a move that threatens profitability in the sector but higher returns for the government coffers.

Developers were more willing to accept higher land prices to settle lease modification deals as quickly as possible as the property market improved, surveyors said.

Tony Tse, president of the Hong Kong Institute of Surveyors, said he understood the government had revised the variables of its land premium formula in recent years.

"Before 1997, the profit margin for all properties was about 20 per cent. But the government offers different profit margins for different properties. Profit margins for industrial properties are higher than those for residential properties," Mr Tse said.

The actual margin earned by a developer is only decided at the point when units are sold to end users, but the imputed margin chosen by valuers is important in determining land prices and developer profits.

CB Richard Ellis valuation and advisory department executive director Yu Kam-hung said the profit margins in some recent cases were set as low as 10 per cent.

According to the Housing, Planning, and Lands Bureau, land value is related directly to the permitted use of a plot.

This is determined by the leasing and planning conditions as governed under the outline zoning plans.

The government charges land premiums for making major changes to a lease.

Its approach is to deduct the construction costs, interest charges and normal deferrals from the total value of the use allowed for the site.

The profit margin is an incentive to proceed with development.

The bureau said developers' profits were a factor in its assessments, and these could be adjusted to reflect the market conditions.

Public concerns were raised about the assessment of land premiums after the Hunghom Peninsula fiasco, in which the joint developers bought the harbour-front blocks for a land premium of $864 million, considered by many to be a bargain price.

Some market watchers estimated controversial plans by the developers to demolish the 2,400 new flats in the project would generate profits of more than $6 billion. But the developers dumped the plan last week under pressure from political and environmental groups.

Midland Surveyors director Ronald Cheung said the government squeeze on profit margins in calculating land premiums was due to prevailing political sentiment.

He urged the government to make public its calculation of land premiums to pacify the critics.

"I am not suggesting that we should make public negotiations between the government and the developers. But the public has the right to know if the land premiums are justified," Mr Cheung said.

Critics say developers usually reap big profits from projects that involve lease modifications.

The residential project by Cheung Kong (Holdings') in Tai Hang, The Legend, is an example.

The developer bought the site from Sing Tao Group's former chairman Sally Aw for $100 million six years ago. A $943 million land premium has been paid to develop the site into a luxury residential project.

The total development cost of the project, with a gross floor area of 500,000 sqft, is estimated at less than $5,000 a sqft, but agents say Cheung Kong could set a price of more than $15,000 per sqft when The Legend is put on the market, probably after the Lunar New Year.

Property consultants said big developers could easily take advantage of the approach adopted by the government. Big developers with strong financial resources were better informed of the market situation, which would allow them to settle land premiums at a time beneficial to them.

They could also borrow money more easily and at a lower rate.

Mr Tse proposed revising the system, saying the land premium should be linked to the selling price. "The government can ask for the land premium up front. If the developer sells the completed units at a price higher than a certain level, the government can ask for more," Mr Tse said.

But developers and the government questioned whether this idea was practical.

"When a deal is made, it is made. It is difficult to ask developers to pay more afterwards, not to mention the problems in case land values drop," a bureau spokeswoman said.

7. KCRC to boost shopping space at railway stations
DENISE TSANG, SCMP 15 December 2004

The Kowloon-Canton Railway Corp (KCRC) is seeking to boost its commercial property portfolio to capitalise on growing demand for shopping space, according to chairman Michael Tien Puk-sun.

Adding shopping malls at stations of new railway lines to its portfolio would lift recurring rental income and passenger numbers, he said.

The move underlines the desire of the government-owned rail service operator to raise income sources at a time when the retail spending and commercial property markets are bouncing back as a result of record numbers of mainland visitors to Hong Kong.

Retail sales grew 11.4 per cent during the first three quarters of this year, and that resulted in growing demand for more retail space.

Rents for prime street shops rose more than 40 per cent this year, according to property consultants.

The KCRC is trying to reduce its reliance on its East Rail mainland border crossing, which has been hit hard by competition from buses.

"If a shopping centre is well run, we will earn double income revenue and shop rental," said Mr Tien, who heads fashion retailing chains G2000 and U2. "The future of the commercial property market looks promising because of the mainland's solo traveller scheme.

"As a retailer, it is hard to find high-quality retailing space."

The KCRC would renovate the 100,000 square foot shopping centre in Pierhead Garden, in Tuen Mun, to spur traffic flow at the shopping centre and on the loss-making Light Rail service, he said.

The largest project to be developed will be a 700,000 sqft shopping arcade above the Tai Wai station as part of the $10 billion Ma On Shan rail link to be opened in the next couple of weeks.

"It will be our biggest shopping mall investment when it opens in 2009-2010," Mr Tien said.

The Tai Wai project, which represents 20 per cent of its 3.45 million sqft commercial property portfolio, could emerge as the next shopping hub after the busy New Town Plaza in Sha Tin, analysts said.

Towering above East Rail's Sha Tin station and attached to the New Town Plaza was KCRC's Citylink shopping mall, which would be enlarged by 63 per cent to 200,000 sqft by 2009, Mr Tien said.

As the KCRC played the role of a property agent for the government for the development along West Rail, it planned to buy a lot of retail space at Tsuen Wan West and Tuen Mun stations, he added.

The commercial development of the two stations should be completed in 2010.

8. Property prices hit by Hunghom plans
SANDY LI, SCMP 15 December 2004

The asking price for small flats in the Hunghom area has dropped by between 2 per cent and 3 per cent since property developers last week shelved plans to demolish the waterfront Hunghom Peninsula.

Sun Hung Kai Properties and NWS Holdings said they would now renovate apartments in the existing buildings. Estate agents expect more small apartments to come on to the market as a result.

That should affect the price of two-bedroom units in ageing buildings elsewhere in Hunghom, said Midland Realty's Wang Wai-keung.

He predicted that owners of the Hunghom Bay Centre and the Whampoa Estate would be more willing to negotiate on the price.

"These older housing estates will probably be less competitive when units at the Hunghom Peninsula are put on sale next year," Mr Wang said.

The transacted price for small apartments at Hunghom Bay is $3,000 per square foot and $3,600 per sq ft at the Whampoa Estate. But the asking prices have fallen at both estates since last week.

Mr Wang ruled out further falls amid a booming market.

Bow Chi-tak of Centaline Property Agency said people interested in buying large luxury flats in a redeveloped Hunghom Peninsula had now shifted their focus to high-end properties in the secondary market.

There were seven transactions in Laguna Verde in the secondary market on December 12, two days after the developers' announcement on Hunghom Peninsula.

Average transacted prices at Laguna Verde were $5,200 per sq ft, Mr Bow said.

9. Bold pricing puts houses near the border into luxury league
ERNEST KONG, SCMP 15 December 2004

Bold house pricing in the northern New Territories suggests that developers are confident they can sell at luxury-level rates. It also suggests that developers see an opportunity arising from a general lack of house development in the district.

Sino Land and Sun Hung Kai Properties both said they planned to sell low-rise residential projects in Sheung Shui at average prices of $10,000 and more per sq ft.

Sino Land said it would sell The Royal Oaks, adjacent to the Hong Kong Golf Club, at prices echoing those of traditional luxury districts such as Island South.

Meanwhile, Sun Hung Kai Properties said it planned to sell units in its upcoming apartment project, Noble Hill, in Tin Ping Shan, Sheung Shui, at more than $10,000 per sq ft.

The Royal Oaks features 44 houses ranging in size from 4,000 sq ft to 8,000 sq ft. Each house comes with a garden of between 1,500 sq ft and 13,000 sq ft.

Sales begin this month.

Noble Hill, which comprises seven 20-storey residential blocks, awaits pre-sale consent.

The target prices for the projects are set even higher than they are for houses in traditional luxury localities such as Kowloon Tong.

"Houses in Kowloon Tong in good condition can be priced at $10,000 per sq ft, but not all houses can achieve that price," said Ricacorp senior manager Eric Lam Chong-wai.

"But houses at Yau Yat Chuen Garden, which is 18 years old, are being sold at about $6,000 per sq ft."

Property agents said the target price for The Royal Oaks, if realised, would probably set a record for residential projects in the northern New Territories.

The closest reference is Hong Luk Yuen, in Tai Po, comprising houses built 12 to 14 years ago. Properties in respectable condition are selling for as much as $7,000 per sq ft.

There are various factors, besides price, that buyers will consider when looking at houses in the northern New Territories.

"Hong Lok Yuen is more accessible than The Royal Oaks, but it is a much larger development that lacks the privacy that high-end flat buyers generally seek," said Ricacorp Properties managing director Ivan Ho Shui-cheong.

Referring to the aggressive pricing by both developers, property agents pointed to buoyant sales recently of a new luxury apartment project, The Grandville, in Sha Tin.

About 150 units of the Nan Fung Development project were sold last weekend. Some apartments sold at $6,000 to $8,000 per sq ft, while units in a low-rise residential block sold for as much as $13,000 per sq ft.

"A price tag of over $10,000 per sq ft is surprisingly high for a project in Sheung Shui," Mr Ho said. Sheung Shui had no genuine housing development to boast of, and a small luxury housing development near the golf links could sell at prices that had little reference to the district itself.

Koh Keng-shing, managing director at Landscope Surveyors, which specialises in luxury homes, said The Royal Oak's proximity to The Hong Kong Golf Club would be a significant factor in attracting wealthy buyers.

He added that it might take time to sell off all 45 houses, considering the comparatively high price.

10. Season is warming up for big projects
SANDY LI, SCMP 15 December 2004

Developers will swamp the market with new residential projects in the next two months, turning the traditional quiet property sale period after Christmas and New Year into a busy one for potential homebuyers.

Fuelled by a marked revival in the property market and more companies announcing pay rises for next year, major developers are taking advantage of the positive sentiment to launch pre-sale programmes. About five big projects with nearly 6,000 units will be up for pre-sale next month.

New World Development is set to release two large joint-venture residential projects, The Merton in Kennedy Town and Tseung Kwun O Area 55B next month.

New World Development sales and marketing manager Akan Wong Ho-yin said prices for the two projects had not been discussed with its joint-venture partners.

"But [New World] believes residential prices still have room for a rise," Mr Wong said.

Prices for units with sea views in Western District were more than $5,000 per square foot, he said.

The 1,182-unit The Merton has been jointly developed with the Urban Renewal Authority while the 1,472-unit development at Tseung Kwan O Area 55B will be developed with the MTR Corp.

"The Merton project should be the only new supply along the waterfront of Western District this year," he said.

Sun Hung Kai Properties said it would release three projects with more than 2,000 units next month. They are the 1,054-unit Victory Arch at Kowloon station, the 764-unit Noble Hill in Sheung Shui and the remaining 200 units at Park Island phase three in Ma Wan.

Agents said the first project for sale would be Noble Hill. The two other projects would be sold after Lunar New Year on February 9.

Sino Land will launch The Royal Oaks, 45 houses in Sheung Shui, this month.

Cheung Kong (Holdings) said Caribbean Coast phase three development Carmel Cove, in Tung Chung, would probably be on the market as early as next month.

11. Project design offers little room to manoeuvre
WONG LEUNG-SING, SCMP 15 December 2004

The developers of the Private Sector Participation Scheme (PSPS) project on the Hunghom Peninsula - NWS Holdings and Sun Hung Kai Properties - will modify the project and sell it.

If the developers do this, how much will the flats be worth? Will the market value be the same as those of private residential homes? Is it worthwhile buying one for own use or investment?

The developers thought the buildings should be torn down because modifying the interiors was not feasible. This was because the design was based on the PSPS model, as is Aldrich Garden, a PSPS project in Shau Kei Wan.

There are flats in Hunghom Peninsula with three bedrooms and two toilets but they have no master bedroom - an obvious difference between Home Ownership Scheme (HOS) and private flats because, while private flats have three bedrooms and two toilets, they have master bedrooms. Some HOS flat owners remove connecting walls between bedrooms to make one large bedroom.

Kitchens and toilets of PSPS flats are smaller than those of private flats and most people would find them inadequate.

While developers can custom-design fixtures and fittings for small kitchens and bathrooms, flat owners will have trouble finding these fittings on the open market. So the value of HOS flats, even after modification, is far lower than that of private flats and the value will fall more quickly.

Now that the property market is picking up, more people are selling their homes and upgrading, so demand for medium- and large-sized flats is on the rise. To meet that demand, developers are looking at ways to enlarge their completed and unfinished flats. Developers of some completed small and medium-sized flats knock down the dividing walls between flats to make one large, open flat, and they have found a ready market for these. They are selling well and at higher prices per square foot than single, smaller flats.

However, in Hunghom Peninsula, many flats cannot be combined and turned into one because the dividing walls are structural.

Even if the developers overcome the technical difficulties of combining two flats to make one of about 1,000 square feet they are still faced with the problem of small kitchens and toilets in such a large, combined unit.

And will buyers be willing to pay a higher price for an enlarged HOS flat which still has quirky design features?

Will the government allow developers to add value-added features such as a clubhouse and swimming pool? Can it include a shopping mall of the quality of a private residential estate? If flats are not modified and sold as is, the value will drop and end up lower than private flats in the same district.

These lower prices will lead to investment opportunities, especially for units in urban areas with sea views.

If flats in Hunghom Peninsula are not modified, they will not attract buyers.

Minor modification will not improve the value of the project much, but major modification will be costly. This really is a dilemma.

Wong Leung-sing is a senior research manager of Centaline Property Agency.
English translation by Nelson Cheng.

12. Reit at head of protest parade
Craig Stephen, SCMP 15 December 2004

A High Court ruling has allowed Hong Kong's US$3 billion reit to proceed, sparing the government a huge scandal and delivering only a modest dose of embarrassment.

But if the Tung administration continues down this accident-prone path, investors may begin weighing in political risks when assessing their Hong Kong plans.

In financial terms, this translates into less money assigned to Hong Kong equities by international money managers. When bungling politicians become more important than economic fundamentals, professional investors tend to take a step back.

A common strain in both the Hunghom Peninsula demolition debacle and now the reit fiasco is a dysfunctional political system that provides mechanisms for only complaint, not participation.

Ratings agency Moody's raised such concerns in May, noting how dissatisfied popular aspirations could damage investor confidence and undermine the government's ability to address critical issues such as the budget deficit.

Today, with the stock and property markets buoyant and the economy robust, such worries might appear misplaced.

Political risk might normally conjure images of rioting in Indonesia or coups in Philippines. But it can also be the less dramatic sort that allows unforeseen events to disrupt normal economic function.

If our government luminaries had adopted a less high-handed, more transparent approach over the reit, the damage to Hong Kong's reputation could have been avoided.

It is easy to see how Director of Housing Leung Chin-man's action to blithely ignore questions of legislators Albert Cheng King-hon, Chan Wai-yip and "Long Hair" Leung Kwok-hung at the reit press launch acted as a bait to ensure a court challenge.

Moreover, the subsequent handling of the IPO allocation only served to fuel suspicion that small investors were getting a raw deal. Secretary for Housing, Planning and Lands Michael Suen Ming-yeung defended the policy saying that a 90:10 allocation - or even 95:5 - between institutional and retail investors was the norm all over the world.

The eventual decision to allocate 65 per cent to retail investors to foster "social harmony" had a hollow ring, coming only after the launch of a legal challenge which called into question the whole listing.

Whether justified or not, the outrage over allegedly unfair dealings between the government and business interests is likely to remain. Other pressure groups are likely to be encouraged by signs the government will bow to public pressure, meaning the West Kowloon cultural hub project and utility price rises could also become lightning rods of discontent.

In the absence of a better system more protests look likely, giving ample reason to pause before investing in Hong Kong.

13. Paul Y-ITC sells stake in Downer for $1.51b
PEGGY SITO and BLOOMBERG, SCMP 15 December 2004

Paul Y-ITC Construction Holdings has ended an association with Australia-based Downer EDI by selling its 19.5 per cent stake in the engineering firm for about A$255.8 million ($1.51 billion).

The company yesterday sold the shares at A$4.55 each, Downer said in a statement to the Australian Stock Exchange.

The price represented a discount to Monday's closing price of A$4.87. UBS managed the sale. Downer shares fell 23 Australian cents, or 4.7 per cent, to A$4.64 after the announcement, while Paul Y-ITC shares were suspended from trading in Hong Kong.

Downer chief executive Stephen Gillies said in a statement that "the sale would have no effect on the commercial operations of the company".

Downer has civil-engineering, construction and mining-services businesses operating mainly in Australia, New Zealand and Southeast Asia.

Formerly Downer & Co, it merged with Paul Y- ITC in 1994, listed on the Australian Stock Exchange in 1998 and changed its name to Downer EDI in 2001.

Paul Y-ITC had indicated a "desire to pursue investment opportunities in north Asia", Mr Gillies said.

Executives at Paul Y-ITC were not available for comment. The company is controlled by ITC Corp, the flagship of merger and acquisition deal-maker Charles Chan Kwok-keung,

In July, Paul Y-ITC deputy chairman Tom Lau Ko-yuen said the company was increasing its investment in its mainland's infrastructure business.

However, he said it was just one of the company's directions, not a dominant one.

Mr Lau said the company would focus on its construction business, rather than diversify into property development. It reported a profit of $163.62 million for the year to March, compared with a loss of $354.02 million the previous year.

14. Fare war looms as Jetstar Asia flies cut-price from Singapore
JOSEPH LO, SCMP 15 December 2004

Singapore's latest entrant in the low-cost airline sector, Jetstar Asia, says it is not concerned about a looming fare war on the Hong Kong-Singapore route, despite increasingly competitive pricing by airlines already flying between the two cities.

Jetstar, which is 49 per cent owned by Australia's Qantas Airways, yesterday launched services to Hong Kong, which will be augmented in the coming weeks with flights from Singapore to Taipei, Pattaya, Surabaya, Shanghai and Manila.

It is the third airline to appear in Singapore this year, following the launches of privately owned Valuair and Tiger Airways, which is controlled by Singapore Airlines (SIA).

Jetstar's strategy to capture a share of the Hong Kong-Singapore market seems largely based on offering lower fares than Cathay Pacific Airways, SIA and Valuair.

It can do this with a combination of lower operating costs, more efficient aircraft use, and packing as many passengers as possible into each flight.

Jetstar operates four Airbus Industrie A320 aircraft, each with 180 seats in a single-class configuration.

The Airbus website suggests that the A320 can accommodate 164 passengers if each is given a 65cm seat pitch, the legroom typically offered by airlines in economy class.

Jetstar is offering an entry-level return fare of $419, although most of its seats are likely to sell at an average of $649. Full-fare tickets that allow passengers to freely change their departure dates without penalty were being offered on Jetstar's website for $1,549.

These prices represent a significant discount to the cheapest available economy-class fares - in the region of $2,800 - between Hong Kong and Singapore just a year ago, when Cathay and SIA dominated the route.

When Valuair launched flights last spring at a $1,300 flat fare, Cathay and SIA responded with promotional tickets priced at less than $1,000, and now $847.

Since then, Valuair has abandoned its flat-fare approach and is offering a price of $888 return for bookings made at least 30 days before departure and $1,250 for a full-fare ticket.

Jetstar chief operating officer Con Korfiatis said the carrier was not worried about a fare war because it would be able to offer low fares indefinitely on its low cost-base.

"With our superior cost-base, we can offer low fares over the long term," Mr Korfiatis said.

He said all Jetstar fares were low while Cathay and SIA offered limited numbers of seats at the lowest promotional prices.

However, SIA and Cathay are able to supplement their income from the lowest-priced fares with first and business class passengers as well as cargo.

The two carriers also operate wide-body jetliners on the route, such as the Boeing 747 and 777 aircraft, each with about 300 economy class seats.

Besides Qantas, Jetstar's shareholders also include Temasek Holdings, with a 19 per cent stake.

Mr Korfiatis told reporters that the company expected to expand its route network to include more destinations in the mainland, as well as Vietnam, Thailand and Indonesia.

15. Oracle gets down to business of ruling the world
BIEN PEREZ, SCMP 15 December 2004

In a performance at the OracleWorld event in San Francisco last week, 1980s pop band Tears for Fears may have well summed up the future for the enterprise information technology market: "Nothing ever lasts forever. Everybody wants to rule the world."

On Monday, business-automation software giant Oracle Corp capped an 18-month drama to acquire rival PeopleSoft by negotiating a US$10.3 billion deal.

Industry experts said the end of that long courtship would kick-start other mergers and acquisitions in the enterprise information-technology sector, where business-automation software suppliers SAP, Oracle, IBM and Microsoft Corp dominate the landscape.

Making strategic acquisitions is necessary for companies to add more size and resources to stay competitive against bigger or better rivals, they say.

In the enterprise applications arena, for example, Germany's SAP remains the largest player. Oracle, after acquiring PeopleSoft, would become the second-largest enterprise application software vendor.

"We're going to give SAP a run for their money," Oracle chairman and chief executive Larry Ellison said last week.

To achieve that goal, Mr Ellison said Oracle "needs more customers and more engineers".

He said the merger with PeopleSoft worked "because we will have more customers, which increases our ability to invest more in applications development and support".

"Oracle's success means other vendors will execute deals. Numerous vendors are targets, notably Siebel Systems and BEA," Yankee Group analyst Michael Dominy said.

The industry's consolidation is the result of a maturing market for technologies used inside the enterprise.

The software products in this market include database, application server middleware, business intelligence tools, collaboration suite, integration and enterprise-automation programmes such as enterprise resource planning (ERP), supply chain management (SCM) and customer relationship management (CRM) systems.

"With few exceptions, the opportunity to sell technology used solely within the four walls of a company has passed," Mr Dominy said.

Oracle represents a model of expansion in the enterprise IT space. It started in the database software market, where it enjoys a dominant position even with strong competition from IBM's DB2 and Microsoft's SQL Server products.

The Silicon Valley-based company has since expanded its product portfolio to include collaboration software, application server middleware and its E-Business Suite, which stacks together its ERP, CRM and SCM technologies.

Its software revenues for the quarter to November 30 were up 13 per cent to US$2.22 billion, on the strength of its database and applications sales.

"The real highlight of our most recent quarter was the 57 per cent growth in our applications business, and this merger [with PeopleSoft] is going to make that applications business bigger and stronger," Mr Ellison said.

But while Oracle savours its conquest of PeopleSoft, its competitors also have something to look forward to.

According to Forrester Research, "a temporary competitive vacuum" would occur after Oracle's victory.

It said SAP, Microsoft's Business Solutions unit and "other ERP and best-of-breed vendors will see increased opportunities to win deals and reposition their offerings".

Research firm Gartner has urged corporate IT buyers not to be tempted by "merger-related discounts" on products that they had not evaluated thoroughly.

bien.perez@scmp.com

16. Symantec in Talks to buy Veritas
SCMP, 15 December 2004

Symantec, the software company that produces the Norton line of computer security and maintenance products, is in talks to acquire Veritas Software, a maker of data back-up and storage programs, for more than US$13 billion, executives close to the talks said on Monday.

The deal, which could be announced as early as this week, would create a huge competitor in the software industry that would be a one-stop shop for products to fight a wide range of threats to personal represent one of the largest software company mergers.

Symantec, like its best-known competitors McAfee and Trend Micro, is trying to become the de facto provider of software to protect networks and personal computers. The New York Times

17. Mosquito control measures to tighten
Matthew Lee, The Standard 15 December 2004

The government will draft an amendment to the law that will allow more active measures to control mosquito breeding.

Under the amendment - which will come into effect next year - Food and Environmental Hygiene Department officers will be able to remove accumulated water or potential breeding debris without notifying the occupant or owner of the premises.

Failure of the occupier or owner to comply with the department's notice for mosquito control will be an offence. The department may also place mosquito surveillance devices in the common areas of private premises.

The action comes amid growing concerns about the two mosquito-borne diseases, Japanese encephalitis (JE) and dengue fever. There were five JE infections this year, including a 29-year-old Indonesian woman who died from the disease. There have been 29 cases of dengue fever reported this year.

Lawmakers were assured that the surveillance devices will not be intrusive.

``The devices will be placed only in common areas, such as corridors, of private premises,'' Deputy Secretary for Health, Welfare and Food Bureau Eddy Chan said.

Legco food safety and environmental hygiene panel members urged the government to give clearer definition of ``potential mosquito breeding ground''.

``A potential mosquito breeding ground is a place that causes an imminent health hazard to the public, where JE or dengue fever cases were reported, or where the ovitrap index reached over 40 per cent,'' principal assistant secretary for Health, Welfare and Food Vincent Liu told the panel on Tuesday.

The ovitrap index indicates the distribution of aedine mosquitoes in a particular area.

Medical sector legislator Kwok Ka-ki was disappointed that the government has failed to tackle mosquito breeding grounds on vacant government land, while food and catering sector legislator Tommy Cheung was concerned about agricultural grounds, pig pens and chicken farms.

Chan said the government will address those concerns.