For ex-patriates in Hong Kong, the annual World Cup Rugby Sevens is the highlight of the year. "It's the biggest sporting event ever, the only thing on the world stage we're renowned for," said a resident of 40 years, Mr Ted Thomas, head of Corporate Communications, and unofficial PR for Hong Kong.
This year the event, played in a 40,000-seat stadium in March, is a metaphor for a troubled Hong Kong. China has entered the sevens for the first time, but England will not be fielding a team. And on Monday the rugby sevens lost its sponsors, Peregrine Investments, Asia's largest investment bank outside Japan. It went into liquidation, leaving the organisers with almost $750,000 (£547,440) worth of useless "Peregrine Sevens" T-shirts, track suits, umbrellas, sports bags and watches.
The fall to earth of Peregrine brought home to Hong Kong how dangerously exposed it has become to the financial turmoil in Asia. The brash investment bank, founded in 1988, seemed the perfect combination of British banking and Hong Kong financial know-how. Last year it earned $57 million from its equity business. Three years ago it became Asia's most active trader and distributor of fixed-income products, particularly short-term corporate debt. It issued $2.6 billion to companies in Thailand and Indonesia in the year and a half before the Asian crisis began in August 1997.
From then it was downhill all the way. The value of the debt securities plummeted. By last week, Peregrine was exposed to corporate bonds in Asia to the tune of $1.2 billion. Last week came the collapse of the Indonesian financial market, and with it the killer blow, the demise of the Jakarta-based Steady Safe taxi and bus company, part-owned by President Suharto's daughter, leaving Peregrine holding $236 million of its debts.
At a press conference on Tuesday Peregrine's chairman, British-born Mr Philip Tose, and managing director Mr Francis Leung of Hong Kong, shed tears as they said it was all over, just as Yamaichi Securities chairman Shohei Nozawa wept publicly when he announced in Tokyo on November 24th the demise of the flagship of Japan's financial industry. In both cases the tears were for staff who had suddenly lost high-paying jobs. Many of the senior executives among Peregrine's 700 employees came from abroad.
The collapse emphasised how Hong Kong's once-booming financial services sector is suddenly contracting. "A lot of middle management in the finance industry are leaving Hong Kong prematurely," said Mr Philip Eisenbeiss of Union Bank of Switzerland, who saw "considerable pain and misery down the road".
He added, however: "There are still over 100 pages in the job section of the South China Morning Post. It's not like the New York depression of 1929."
With the employment situation worsening, a slow exodus of ex-patriates is under way. "A lot of my friends have left who had intended staying on longer," complained a European official. "People are leaving not because Hong Kong rejoined China but because of lack of opportunity," said an analyst, adding: "Actually nobody's scared of China anymore. Beijing is seen as a solid, sensible, technological government."
For Hong Kong residents the pain has being felt at all levels, especially since October when a speculative attack on the Hong Kong dollar caused interest rates to rise and share and property prices to slide. The rich have hit on hard times. "Many were billionaires several times over, now they are just billionaires," said Mr Eisenbeiss.
"Money was like water, well, it ain't anymore," said Mr Brian O'Connor, an Irishborn businessman who is setting up a private healthcare system in Hong Kong. "People here used to be able to rely on equity issue - the issuing of shares - to provide cash flow of up to 20 per cent of a company's equity. They could do it in 15 minutes, just by making a telephone call. Everybody used it to raise money. Now there are no takers. Who's going to underwrite a rights issue, or buy into the market when it's so volatile?"
The Asian crisis had in fact exposed companies whose capitalisation value had got too far ahead of reality, Mr O'Connor believed. "Most Hong Kong entrepreneurs have never been through a bad time. There's a new dawn of reality here and they have to deal with the real world. What these Hong Kong companies need are work-out specialists who can sweat the assets."
Some of the devaluations have been dramatic. First Pacific, an investment and management company owned by Hong Kong's richest resident, Li Ka-Shing (known as "Superman") and regarded as a model of Asian enterprise, has just lost 70 per cent of its value and "is now shuffling its assets like crazy", said a financial consultant, who warned: "If such groups screw up then we have a real problem."
Yesterday Hong Kong stocks nose-dived again following a slide by the Sino group of companies whose share value plunged by nearly 50 per cent.
The big losers in Hong Kong's downturn are the property companies, and the home buyers who took out mortgages last year only to find the value of their homes go down and the mortgage rate go up.
Hardly an apartment has been sold in Hong Kong since October, in contrast to a year ago when potential buyers queued just for the right to bid in auctions. Property values are expected to crash by 40 per cent before the crisis is over, according to a survey in Asia Business which concluded that a third of loans taken out last year are in danger of default.
Sun Hung Kai Properties, the third-biggest company in Hong Kong, which has seen its capital valuation drop by a third from a high of HK$220 billion (£22 billion), boasted recently that it would not discount any of its apartments, then knocked 38 per cent of the price of flats in Tung Shan Terrace, leaving home-owners in similar new apartments furious in the knowledge they will be paying overpriced mortgages for 20 years.
The financial downturn has left Hong Kong's 6.3 million people with less disposable income, and this, combined with a dramatic fall in tourism, has put many retailers and restaurateurs, especially at the top end of the market, in a desperate plight.
Between 500 and 800 of the 10,000 licenced restaurants in Hong Kong could close within the next six months, warned Mr Tommy Cheung, president of the Association of Restaurant Managers, who said sales were dropping 10-15 per cent because of the fall in the stock and property markets and the downturn in tourism. Hong Kong's famous boutiques are folding or holding knock-down sales.
In one expensive mall in Central, fashionable stores like Vivienne, I.T. and Katherine Hamnet are plastered with notices offering 6070 per cent off in a bid to lure shoppers.
Hanging over the territory is the prospect that the Hong Kong dollar, which is pegged to the US dollar at a rate of 7.3, will be forced to break the link by currency speculation. Many Hong Kong people like Ted Thomas, who castigated journalists before the July 1st takeover last year for predicting that China would be the cause of trouble for the territory, regard the peg as an impediment to fair competition, now that tourism has become so cheap in countries like Thailand and Malaysia.
"We were famous as a bargain shopping centre," he said gloomily over a beer in the Foreign Correspondents Club. "What has Hong Kong got to offer now? All the other places are so much cheaper."
Tourism has also been hit by bad publicity from the "bird flu", the avian influenza strain which killed five people and forced the authorities to slaughter all 1.4 million of the territory's chickens.
Some bankers believe that Hong Kong itself will remove the peg and devalue the Hong Kong dollar later this year. But the leader of the former British colony, Mr Tung Chee-hwa still insists that delinking the currency would destabilise the economy and that in the light of the enormous depreciation of other Asian currencies, a newly floated Hong Kong dollar would take a beating. Many Hong Kong people are taking no chances. "I've put all my savings into US dollars," said a financial manager. "I just keep Hong Kong dollars in my pocket for day-to-day spending."
Some have criticised Mr Tung for his low profile during the recent crises, but others believe the China-appointed chief executive is deliberately letting the familiar faces from the British colonial days finance secretary Mr Donald Tsang and Chief Secretary Ms Anson Chang make the running to subtly underline stability and continuance. He appears depressed by the turn of events, admitting on Wednesday that they were in a period which would be "painful" to Hong Kong people who should "unite and weather the storm together", as the fundamentals were sound.
Perhaps the only person who can take grim satisfaction from Hong Kong's woes is fortune teller Raymond Lai. Consulting his thick canon of omens recently, he foretold that 1998 would be a bad year for birds. Mr Lai didn't have any prediction for the outcome of this year's Rugby Sevens.
If the organisers had consulted him early enough he might have warned them that it was perhaps not such a good idea to take as their sponsor for 1998 a year when all birds "will suffer sickness and disaster" a company named after a falcon.
