Standard & Poor's Ratings Services said Thursday that competitive local conditions are forcing many Hong Kong property companies and investors to focus on the property market in the Chinese mainland for better growth.

Credit analyst John Bailey, a director at Standard Poor's in Hong Kong said, to date, most major Hong Kong developers have approached the Chinese mainland market with caution and generally seek to invest slowly in a step by step manner. "However, the importance of Chinese mainland property sector is likely to play amore important part in the property portfolios of Hong Kong-based companies," added Bailey.

His remarks came as Standard & Poor's launched a commentary report Thursday entitled "Hong Kong Companies Focus on Chinese Mainland Property."

While Chinese mainland's property market presents enormous opportunities, it is extremely competitive and carries with it significant risks. Despite recent improvements, irregularities andillegal deals still exist, according to the report.

Of particular concern is an emerging trend of excess supply, which could result in downward pressure on prices. The latest figures of the Chinese mainland property sector indicate that investment in real estate grew by 41.1 percent year on year in thefirst quarter of 2004. Local governments trying to stimulate economic growth and aggressive lending by commercial banks have contributed to the boom.

The report believed that demand for high-quality properties-built by many Hong Kong developers-remains high. Over the long term, Chinese mainland's strong economic growth, significant urbanization, and a desire to upgrade property, should continue topropel demand.

"For those companies with a strong brand name, good operationalskills, and easy access to capital, Chinese mainland should be an attractive growth market," said Bailey.

Source: Xinhua