Hongkong's criminalisation of
commerce just protects cronies (SCMP April 9)
Hongkong values are sometimes truly upside down. The season of the
Rugby Sevens tournament saw several people hauled before magistrates
for the "crime" of attempting to re-sell tickets to the event. In a
city which purports to believe in the market, a perfectly reasonable
business activity is made into a crime.
For what reason? It is hard to say exactly, but perhaps it is to protect
those who themselves control the ticket system for what is supposed
to be a tourist attraction as well as a public, international sporting
event. OK, the Sevens has organisers, sponsors and patrons as well as
a paying public, and they have legitimate interests to defend. But what
good, I ask, can come of stopping those who want a last minute ticket
from paying whatever is the going secondary market price for an event
which is sold out?
Ticket "touting" is a useful business involving a significant degree
of risk. The ticket entrepreneurs must invest without knowing in advance
whether he will be able to re-sell them at all, let alone at a profit.
No "buy and hold" in this business. Some events are of course assured
of a sell-out, but not the Sevens -- this was the first time since 1997
when tickets were all sold before the event began. The criminalising
of legitimate commerce is particularly outrageous in the age of on-line
auctions and web sites offering last minute purchases of almost anything.
Last minute buyers can get amazingly cheap deals, or pay through the
nose for something - say, a Grand Slam tennis final - they desperately
want. That's the market.
Legal sanctions should only exist to prevent market cornering or manipulation.
How can one individual with, let us say, 7 rugby tickets for resale
- 0.1% of the total in issue - be said to be either manipulating the
market or exploiting a monopoly?. If there is a problem it is with the
process of allocation of the vast majority of tickets.As with laws against
parallel importing - buying from sources other than local dealer monopolies
-- the scandal here is not touting but the motives of officials who
support such restrictive practices.
Criminalisation of fair trade in consumer goods, be they tickets or
teletubbies, contrasts with the government's backing for major cartels
- the small group of developers who dominate the land market, provide
lucrative retirement jobs for civil servants and wield massive influence
on housing policy. How come they are allowed to hoard land, to cooperate
in anti-competitive deals, etc. while small-time touts with no market
power are prosecuted? Instead how about some action against share touting
encouraged by rule waivers provided by a monopoly run by a former civil
servant - the Stock Exchange?
Of course buyers themselves must always beware of the share touts posing
as investment bankers and analysts. They must protect themselves because
no one will do it for them. Exchange chief executive K.C. Kwong gives
the impression that his big salary is a just reward for doing the bidding
of the big boys rather than protecting minority investor interests or
enforcing new issue rules.
Ask the Li family. Li Ka-shing's clan may have much egg on it face
thanks to misleading statements about Richard Li's accomplishments,
and the 90% fall of the PCCW share price from a peak of $26 to $2.6.
Sure, they have lost a lot of paper wealth as well as reputation. But
remember how much they and their associates made as a result of the
pumping up of the PCCW and Tom.com share prices? Those who get in on
the ground floor of share spirals always make money, however steep the
There is neither time nor space to examine all the family related
dealings in either company. I do not pretend to know the bottom line.
However, it is a matter of record that in May 1999 1.1 billion shares
in PCCW were placed in May 1999 at just HK$0.31 each. Just eight months
later supposedly well advised institutions were buying further placements
at HK$23.50 and the self serving investment "analysts" amplified the
company's hype about Network of World, "rolling out broadband across
Asia"! with totally fictitious value projections.
These investment banks used the techniques of Dr Goebbels and should
now have his credibility.. Those ludicrous prices could not of course
hold but they stayed in the stratosphere long enough for some to cash
out.Richard Li's private company was able to cash out of HK$3.6 bn dollars
worth at HK$15 a share meanwhile deputy chairman Francis Yuen was making
a handy 500% profit by exercising share options granted not long previously,
and then stocking up on a new lot of options. Another option beneficiary
was Alex Arena who made the profitable move from government telecoms
adviser to Richard Li's telecoms front man.
The story at Tom.com, which received various waivers from the supposed
rules, was even worse for the majority of public investors who jumped
in when they saw that Cheung Kong and Hutchison were already players.
The public was suckered into buying astonishingly priced shares in an
almost empty shell at prices multifold those paid a few weeks before
by the insiders, who probably included, through offshore accounts, executives
of various "prestigious" investment houses. Given all this - and a slew
of similar GEM episodes - it is hard to imagine that Hongkong has much
to teach mainland regulators. Indeed, Zhu Rongji may be wondering why
the Beijing corruption scandal which claimed Chen Xitong did not also
deal with the behavior of some patriotic investors from elsewhere. ends
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