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November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

AsiaweekTimeAsia NowAsiaweek story

FEBRUARY 11, 2000 VOL. 26 NO. 5

Spreading the Risk
It's either bricks to clicks or the deep six

"This is not hype. This is for real." So says Sino Land chairman Robert Ng as he answers for the bazillionth time a question about his motives for moving his property company into a business it knows nothing about, the Internet. Skepticism is a given, since Sino Land, one of Hong Kong's largest developers, was for a while a holdout in the SAR's dot-com mania. Now the company has its own Internet investment arm - essential for the fashionable technology player - and Ng has adopted the appropriate cant.

Cover: Change Is in the Air
The Internet education of Raymond Kwok
Extended online interview
Why property mogul Raymond Kwok is eyeing the Internet
Spreading the Risk
It's either bricks to clicks or the deep six

Selling with Style
How Japan's Egoist fashion outlets popped to the top in the retailing business

Already at record highs, Singaporean stocks may still surge

Until Gus Dur reforms immigration, battle the Indonesian system

South Korea: Revolt of the Citizens
A blacklisting campaign shocks lawmakers

Pakistan: Of Rhetoric and Reality
Why Pakistan is not declared a terrorist state

India: 'Pakistan Unpredictable'
But India can hold its ground, says Fernandes

Indonesia: Washington on Wahid
America's top man on East Asia applauds Indonesia's president

Thailand: The Enemy on the Border
More than anyone else, it's Myanmar United Wa State Army that threatens Thailand's security

"We are seeing a once-in-a-millennium shift to the New Economy," he says, peppering his sentences with words such as "broadband," "bandwidth" and "B2B." "I am not in the Internet game just because everyone else is dot-comming themselves. Property developers may not be on the cutting edge of technology but we understand risks and rewards."

So many other Hong Kong property giants have announced look-alike Net strategies it ought to be called "dot-cloning." But executives say the risk involved in not joining the parade is high. For years, Hong Kong's developers - owners of some of the most expensive real estate in the world - have enjoyed fat profit margins. They have also been vulnerable to the booms and busts of the real estate cycle. To soften the balance sheet blow during recessions, when property values and rents dive, some of the largest players have diversified into hotels, telecommunications and other businesses. "Now it's tech because really there isn't much more room left in some of the other fields," says Peter Churchouse, property analyst at Morgan Stanley Dean Witter.

With the Asian Crisis, "the property scene in Hong Kong has changed over the last two years," agrees Otto Wong, regional property analyst at Salomon Smith Barney. "Margins are down and developers must rely on heavier volume to maintain profits." Churchouse divides the new-look companies into three types. "A handful of them are investing mainly in ventures which complement their core property business," he says. "Others are just investing in startups which they hope someday to list on Nasdaq." The third: those taking advantage hype and the sky-high valuations of technology stocks solely to boost their stock price, enabling them to float more shares, raise more cash and "replenish their land bank."

Companies intent on making the transition from bricks to clicks will be successful to the extent that they are able to hire managers who know the business, says Churchouse. That kind of talent is in short supply, and besides "many property companies have been loath to bring in outside expertise in the past because family dynasty thinking prevails," adds Churchouse. "It's a sort of corporate xenophobia."

However, executives such as Ng say they have no such hang-ups. The tech boom has made it easier to deploy assets quickly in a promising, high growth sector. Over several years Ng says he expects to spend up to 10% of Sino Land's total group assets, roughly $6.5 billion, on tech ventures.

"The Internet is still in its infancy and I can understand why some people are skeptical about developers plunging into high-tech," Ng says. "Right now there is not much to splash out on except for lots of Yahoo wannabes. But bring me the next Microsoft or Intel and I will show you how much appetite I have for high-tech investments." That's a hunger Ng shares with every other Hong Kong property company - and with a large part of the planet's population, too.

Dotcommed Hong Kong Property Companies

Now that property profits are down, Hong Kong developers are looking for new places to invest. For now, the Internet seems the way to go

Cheung Kong

Owns 20% of (e-commerce portal); 48.75% of iBusiness; Internet joint venture with Hutchison, HSBC and Hang Seng Bank

Henderson Land
Has new license to roll out $100-million broadband network; starting $100-million e-commerce venture called in partnership with Microsoft and Hong Kong & China Gas; joint venture with Microsoft to provide Internet via TV set-top boxes

Kerry Properties
Has joint venture with, a back-end logistics firm for e-commerce ventures; allied with Hang Seng Bank for e-shopping and e-payments

New World
Owns a stake of New World Cyberbase; owns 18% of; joint venture with Yahoo!

Sino Land
Owns SinoNetHK, internet investment arm; stake in Chinese portal; joint venture with CCT Telecom for broadband infrastructure; owns venture capital company investing in Hong Kong-China high tech companies

Wharf Holdings
Owns more than 70% of Nasdaq-listed i-Cable (pay-TV and broadband services)

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