Sunday 16th September 2007

Dear Reader,

Yes, our last article was a satirical piece, based on real events. Yes, the HK Government is seeking to set train fares, but not yet food prices. Yes, it almost certainly holds shares in Hutchison Whampoa, about 3.2% of the float, but no, it is not seeking to merge the supermarket chains. Yes, the Government is banging on about Islamic finance as if the banks weren't already aware of it, but no, they are not seeking to push the supermarkets into Islamic shopping. And yes, the Government almost certainly holds shares in CLP and HK Electric, giving it an incentive to maximise their profits.

Now read our new article, and help us by taking an opinion poll on the China Bubble and HK's response. Your voting e-mail address and PIN are at the top of this e-mail.

Incredibubble! (16-Sep-07)
What else can you call a US$3.2tn market which has gained 358% in 20 months and trades on a historic P/E of over 60, which is probably closer to 80-100 excluding stock-market and real-estate revaluations from "E". We look at the bubble, the impact on HK, the thru-train, the calls in HK for an A-H arbitrage mechanism, and how the bursting may affect the socio-political system. The absence of a free media is itself contributing to the bubble.

MTRC: Time to vote (11-Sep-07)
We analyse the MTRC circular on the so-called "Rail Merger". We reaffirm our advice to independent shareholders to vote AGAINST the transaction. VOTE NOW - and don't assume that others will stop the deal for you. The Government will spare no effort trying to push this through.

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.

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David M Webb