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Hong Kong's first avian flu crisis started in March 1997, when close to 7,000 chickens on three rural farms were wiped out by an H5 strain. To contain the outbreak, the Hong Kong government ordered a mass slaughter of all poultry. Altogether, the first outbreak led to 18 confirmed H5N1 cases in humans, resulting in 6 deaths. The decision to slaughter the chickens was controversial at the time. Poor coordination and inefficiency characterized the first cull and damaged the Hong Kong government's credibility. The crisis put pressure on the chief executive, Mr. Tung Chee-wah, to find new solutions to curb the avian flu. Against the background of the first bird flu crisis, the Environment and Food Bureau and the Hong Kong government faced repeated bird flu outbreaks in May 2001 and February 2002. With the recurrence of the avian flu, there was an opportunity for the Hong Kong government to show the public how it learned to manage the continuing crises.

One of the most frustrating parts of trading bonds in Asia today is that prior to placing a trade, buyers and sellers must spend hours phoning dealers to get quotes and aggregating market research. In July 2000, HSBC, Deustche Bank, and Citigroup joined forces with Bridge e-Markets to form BondsinAsia (BIA), which aimed at facilitating the trading of Asian fixed-income securities. Officially launched in January 2002, BIA rolled out an electronic trading system in Hong Kong and Singapore. The system replaced paper and telephone information gathering by giving access to online price and research information to market participants on an instantaneous, 24/7 basis. As BIA was preparing to expand its portal to other markets, a number of questions remained on many industry players' minds. How would the legal, regulatory, and technical issues affect BIA's cross-market franchise model?

In 2002, Hong Kong civil servants were the envy of many people. Their salaries, fringe benefits, and employment terms compared favorably with international standards. However, as civil servants staggered from one disaster and mistake to another, the public had an impression that their performance did not match their liberal remuneration. While private sectors were announcing massive layoffs, pay cuts, and reduced benefits in the sluggish economy, the Hong Kong government was under pressure to reduce civil service pay, and, at the same time, to increase public accountability and improve performance.

Citic Pacific Ltd. (CPL) had to decide whether to purchase newly reclaimed land at the waterfront of Victoria Harbour, Hong Kong, and develop a Grade A office building for investment purposes. The decision was to be made at an approaching cyclical high point in the market for Grade A office space, in the second half of 2000. CPL knew that the commercial real estate market was extremely cyclical and that very few companies active in the market had managed to time rental cycles and investment strategy successfully. If Citic Tower II came onto the market at the right time, it might be far more promising than it appeared in mid-2000. Nobody knows when the "right time" is, of course, but being able to defer the decision to develop while still retaining control over the site could buy time and the option to retain what could be a very good opportunity. In other words, CPL had to value its options.

On March 22, 2001, Microsoft Corp. warned computer users that an individual posing electronically as a company representative had fooled VeriSign, Inc., the leading digital certificate authority, into issuing two fraudulent digital certificates in Microsoft's name. The certificates could be used by malicious attackers to trick computer users into running unsafe software programs. Despite the discovery of the fraud and the follow-up investigation by the FBI, the person who registered the certificates could not be found. The Microsoft case was the world's first reported case of digital certificate fraud. It raised serious questions about the sophistication of digital certificates and signatures and the rules governing the conduct of issuers and users in the electronic marketplace. The accident also revealed that a simple identity certificate/signature comes with complex and nonstandard policies and procedures that are vulnerable to regulatory and security flaws.

In January 2002, speculators in the finance community suspected that Ha Chung Fong, chairman of Fountain Set (Holdings) Ltd., might be in the mood to reconsider a previous proposal to privatize the company. Ha was dissatisfied with the counter's trading volume, and some managers of the firm also believed that the share price did not reflect its true value. In 1995, Fountain Set had attempted to privatize by way of a scheme of arrangement under Section 166 of the company's ordinance. The scheme was later abandoned due to difficulties in reaching an agreement between the company's consortium shareholders and also problems in ascertaining the proportion of the holders of the company's convertible notes. With the redemption of the convertible notes in 1999, financial analysts believed that privatizing the company would not be as difficult as in 1995.

PetroChina, the largest oil and gas company in China, was made a showcase for sound corporate governance in China's state-owned enterprises (SOEs). Its initial public offering (IPO) was part of the government's plan to lay the groundwork for other large capital-starved SOEs on the global capital market. In spite of the restructuring efforts, some analysts felt that the company was not yet close to where it needed to be in terms of international governance standards. In analyzing China's political and economic background and PetroChina's governance model, this case demonstrates that the corporate governance system in China offers limited protection for minority shareholders.

In late January 2000, Cable & Wireless plc (C&W) and Singapore Telecommunications Ltd. (SingTel) unveiled a proposed merger of equals between Cable & Wireless HKT (HKT) and SingTel. Both HKT and SingTel were the leading telecom operators in their local markets, and a merger between the two would create the second-largest full-service telecom provider in Asia outside Japan. Nonetheless, the proposed deal was received coolly in Hong Kong and Singapore, owing to uncertainty over its political and financial ramifications. C&W anticipated that the Chinese government would prefer to keep HKT in local investors' control and had, therefore, considered the possibility of receiving offers from potential suitors in Hong Kong, possibly including Pacific Century CyberWorks Ltd. (PCCW). To respond to SingTel or any other potential bidders, C&W had to prepare itself for the negotiations and find a fair value for its stakes in HKT.

On August 2, 2000, Korea-based Pohang Iron & Steel Co. Ltd. (POSCO) and Japan-based Nippon Steel Corp. (NSC) crafted a cross-border, cross-shareholding alliance. At a joint press conference, the two companies said their alliance was not limited to their firms alone and said approaches from others would be welcomed. Their invitation had aroused the interest of the largest steelmaker in China, Baoshan Iron & Steel Co. Ltd (Baosteel). In January 2001, Baosteel signed a memorandum of understanding with POSCO to create a cross-shareholding in each other's shares. The company also planned to invite NSC to acquire a stake in the group. If the Sino-Japanese alliance succeeded, the three steel giants would form a three-way cross-border, cross-shareholding alliance. Such a bold move would help Baosteel to gain an upper hand in competition with European and American steel firms eager to enter the Asian market.

Presents measures of financial performance and health for pairs of Asian and American companies in different industries from 1996 to 2000. The measures include economic profit (also known as Economic Value Added) and other classic measures, such as financial ratios and stock price performance.

Although mortgage securitization was old hat in the United States and Europe, it had not really caught on in Asia. Past experience in Hong Kong suggested that efforts by individual institutions to securitize mortgages had not been entirely successful. In spite of this, the Hong Kong government placed high hopes in Hong Kong Mortgage Corp. (HKMC) to develop the mortgage-backed securities (MBS) market. However, some banks wondered whether it was timely for them to get into the MBS business in Asia. In particular, the banks and the HKMC had very different risks and concerns regarding the development of MBS. Teaching Purpose:

New World Development Co. Ltd. (NWD) was a leading conglomerate based in Hong Kong. After more than 20 years of operations, the group had expanded its core businesses to include property, infrastructure, services, and telecommunications. From late 1997 to June 2001, the stock price performance of the company had been abysmal. Its efforts at asset disposals to reduce gearing, while making additional investments in new businesses, confused investors. Security analysts also blamed the company for not keeping its promise to focus on its core business of property.

Electronic Communications Ltd. (ECL) had decided to make China its second home and to seek common prosperity with Chinese people. The company knew that there were major gains to be made, but there were also risks and challenges. One of these was the management of cultural differences. An essential question facing the management was whether it should adapt ECL's management practice to the Chinese culture or instead implement ECL's global management policies in China.

Since the completion of its merger deal with Cable & Wireless HKT Ltd. in August 2000, Pacific Century CyberWorks Ltd. had been gripped by the full teeth of the bear. By early April 2001, the company had seen its share price plummet by nearly 90%. While many retail investors in Hong Kong were mourning their losses, some corporate insiders managed to find a clean exit route and were able to earn substantial profits. An interesting question to the general investors was: if they had followed the inside track, would they have been able to beat the market?

Phuket Beach Hotel has an opportunity to lease its underutilized space to a karaoke pub and earn a rental income. Alternatively, the hotel could develop the unused space and create its own pub. The general manager of the hotel must decide which of the two capital projects to recommend to the hotel owners. This case presents sufficient information to build cash flow forecasts for each project and to rank the mutually exclusive projects using various evaluation criteria.

On March 3, 1999, the financial secretary of Hong Kong announced in his budget speech that the government planned to partially privatize the MTR Corp. through the sale and listing of a minority interest in the corporation's shares. The listing of this integrated rail operator on October 5, 2000, created an important precedent for future privatization of government assets. However, a host of uncertainties remained about how value enhancements are achieved in this privatization.

A major corporate investment decision faces CITIC Pacific Ltd. The company has to decide whether to purchase newly reclaimed land at the waterfront of Victoria Harbor, Hong Kong, and develop a grade A office building for investment purposes.

In mid-1999, negotiators for Walt Disney Co. and the Hong Kong government were having intensive discussions about the possibility of building a theme park known as Hong Kong Disneyland on Lantau. The case presents detailed information about the proposed theme park and the assumptions made by Walt Disney in conducting an economic assessment of the project. Also lays out other alternatives for Disney's entry into the China market.

In mid-1999, negotiators for the Hong Kong government and the Walt Disney Co. were having intensive discussions about the possibility of building a theme park known as Hong Kong Disneyland on Lantau. This case presents detailed information about the proposed theme park and the assumptions used by the Hong Kong government in conducting an economic assessment of the project. Also lays out other alternatives for reinvigorating the tourism industry in Hong Kong and the development of Penny's Bay (the proposed site of Hong Kong Disneyland) in Lantau.

On February 18, 2000, month-old Internet startup, Tom.com, began its initial public offering and would open for trading on March 1 on Hong Kong's Growth Enterprise Market. The Internet company, majority-owned by Mr. Li Ka-shing's Cheung Kong Holdings and Hutchison Whampoa, planned to catch the frenzy that Hong Kong's investors had for new Internet stocks. The huge demand for Tom.com shares raised Internet frenzy in Hong Kong to new levels reminiscent of the red chip fever of 1997. Many of the retail investors had no idea what the company did but were betting on the IPO being a winner largely because of Mr. Li's clout with China. In this case, the student is asked to serve as an investment advisor to a retail investor considering subscribing to Tom.com's IPO. The student will provide an analysis of the risks and opportunities of investing in Tom.com and make a recommendation on whether the client should buy Tom.com's shares at the offer price.