Wednesday 14th February 2007

Dear Reader,

HKEx keeps wide spreads (14-Feb-07)
The Board of HKEx (0388) today decided to keep wide bid-offer spreads for stocks below $5, cancelling its plan to improve market efficiency after intense lobbying by some small brokers, who also campaigned against the elimination of minimum commissions in 2000-2002. Once again in Hong Kong, political expediency trumps logic and commitment. We call on good companies to now distinguish yourselves by consolidating your shares to get into the efficient price zone above HK$5.

MPF Part 1: What it Costs You (11-Feb-07)
In Part 1 of our new MPF series, we look at the frightening first disclosures of expense ratios for MPF funds, and how this will crush the performance of the money trapped in the MPF schemes relative to the markets they invest in.

MPF Part 2: Stop the Increase (11-Feb-07)
We call on the Government to stop the proposed increase in MPF contributions, which we estimate will cost HK$4.24bn per year. We renew our call to abolish the MPF and return economic freedom to the people. As more capital gets trapped in MPF funds, demands to withdraw it for urgent needs will become more frequent. And is Donald Tsang planning a Mandatory Medical Savings scheme?

MPF Part 3: The Bloated Regulator (11-Feb-07)
MPF's regulator, the MPFA, was grossly overcapitalised at inception and has been waiving the annual registration fee it should be charging to trustees, thereby subsidising the industry at almost HK$200m per year. This fee should be collected to cover its costs, and the MPFA should return $5,000m of surplus capital to the Government.

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David M Webb