Monday 10th September 2007

Dear Reader,

We are just back from Dalian and the World Economic Forum, where every financial-type on the panels was careful not to say the word "bubble". It just isn't polite to tell your hosts that their market is overvalued by about US$2 trillion. Just as we were heading North, out came the entertaining circular on MTRC's proposed acquisition and fare-capping transaction, accompanied by bullish research from various conflicted brokers who are working on the deal. We will be writing in a day or so to respond to the circular and tell you why you should vote against this proposal, unless you enjoy losing money.

But first, we must address the events of Friday in a wider context...

Intervention returns (10-Sep-07)
We look at the HK Government's surprise disclosure of 5.9% of HKEx, where it might go next, and how it quietly scrapped a 5% benchmark on the Exchange Fund weighting in HK stocks, leaving it as the 2nd-biggest investor after the mainland Government. With about HK$1 trillion of surplus liquid assets, whatever happened to Donald Tsang's "big market, small government"? We call on the Government to return its surplus capital to the people with a 10-year program of deliberate budgeted deficits.

Minister supported MTRC fare autonomy (31-Aug-07)
The new Secretary for Financial Services and the Treasury, and hence a director of MTRC, Professor K.C. Chan, has stated his support for fare autonomy, something worth billions of dollars to MTRC shareholders, which the Government is now trying to take away for no payment in return.

A by-election in HK (31-Aug-07)
We take a look ahead to the forthcoming by-election in Hong Kong, and marvel at the hypocrisy of the DAB and Regina Ip.

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David M Webb