Sunday Communications signed a $900 million supply contract with Huawei Technologies. Sunday group managing director Bruce Hicks said the company was stealing a lead on its rivals by buying high-tech equipment made in China. 'You have to recognise what is going on in the world,' he said.

Rival Hutchison Whampoa preferred Lunar New Year for the sale of 3G handsets, debuting them on the third day of the year of the monkey. Following disappointing sales in Europe in 2003, the Hong Kong conglomerate resorted to publicity gimmicks to keep consumers in its home market onside - including a shop tour by the company's managing director, Canning Fok Kin-ning, at 3.15pm (saam-dim-saam or 'three point three' in Cantonese). Despite poor battery life on the only 3G handset model available and reports of poor video quality, Mr Fok maintained: 'Our business is doing well.'

FEBRUARY

Hutchison chairman Li Ka-shing incurred the wrath of investors when his company placed 1.81 billion shares at a steep discount, netting a quick $1.3 billion profit.

Hutchison 'pre-sold' - at a steep discount to their last trading price - 1.81 billion Vanda shares it received in exchange for its fixed-line operation Hutchison Global Communications. Vanda shares tumbled 30 per cent. 'Investors were hoping to hitch a ride with Li Ka-shing but ended up paying a high price,' said Stockbrokers Associations Henry Chan. 'This should be a good lesson for investors and next time they will be more careful.'

Meanwhile, shares in China Life Insurance - having pulled off 2003's biggest IPO only two months earlier - fell 5.26 per cent after the national audit office said it uncovered 5.68 billion yuan in accounting irregularities at its parent and predecessor companies. 'All the problems have no relation with the listed entity [in Hong Kong and the United States],' the company said. SCMP columnist Jake van der Kamp asked: 'Are mouldy old state corporations in the mainland considered as being better than Hong Kong stalwarts like HSBC and Cheung Kong? C'mon, give me a break. Let the punters on the street play with H-shares in between the Mark Six and the horses but people with money in Hong Kong know their own market and step in earlier when they see silliness.'

HSBC chairman David Eldon similarly warned of over-exuberance, and of a property bubble as speculators re-entered the market. 'Most people now seem to believe the worst is behind us, and it probably is,' he said. 'However ... sentiment may be running ahead of the fundamentals.' He added Hong Kong was too focused on China.

'The mood is so different,' was the observation of one brokerage sales director. 'In Central, people are walking with a smile. You have to make reservations in Chinese restaurants and you have to queue up for taxis. It's funny how quickly the property and stock market boom can help shopping demand.'

BEWARE THE IDES OF MARCH

If Hong Kong was too focused on China in February, investor sentiment in March told a different story. Shanghai-based chipmaker SMIC became the first main-board listing in five months to fall below its offer price on trading debut. The company's 8 per cent first-day fall followed the failure of high-profile spin-off Tom Online to match its offer price on its Growth Enterprise Market debut. Poor response to the initial public offering of China Resources Peoples Telephone capped a miserable month for the Hang Seng Index, which was also hit by fears of an economic slowdown on the mainland as the government there tried to reel-in an overheating economy.

Hong Kong's property developers were faring rather better. Estate agents estimated the number of residential transactions would climb 43 per cent this year to 66,000, the highest level since 1999. In fact, they would be almost twice that 120,000 before the year was through.

Bullish sentiment was seemingly confirmed when Sun Hung Kai Properties bought a house in Deep Water Bay for $450 million, a post-bubble high. The purchase was reported on April 1, but steadily rising prices proved the purchase was no April Fools joke.

Meanwhile, the West Kowloon cultural district was emerging as a centre of controversy. Sir Norman Foster's design called for a glass canopy covering more than 55 per cent of the 40-hectare site, but not everyone was impressed. One builder hit upon a theme that would continue to haunt the government: 'This is pie in the sky, literally. Maybe Foster intends the canopy to be supported by the residential blocks.'

APRIL

April began with Hutchison's third price cut in as many months for its 3G services, but it was not all bad news emanating from the Hutch camp. After new disclosure requirements forced companies to reveal directors' salaries in their annual reports, it emerged that Hutch managing director Canning Fok Kin-ning earns a staggering $343,150 a day.

North of the border, China's increasingly frantic efforts to cool the economy scared H-share investors. JP Morgan economist Adrian Mowat announced: 'China is more at risk of earnings downgrades this year than any other market in the region.' But not everyone agreed China was passe. CSFB's Paul Calello waxed lyrical about the number of investment opportunities in the country: 'Wherever you go in China, there's someone to meet.'

MAY

Anheuser-Busch and SABMiller began a prolonged, bitter battle for Harbin Brewery. Anheuser eventually would win the day.

China's economic juggernaut rolled on, leaving many wondering about the efficacy of its braking system. Beijing appeared to be having difficulty reining in local governments' profligate habits, despite Premier Wen Jiabao's familiarity with their methods. 'The last part of Premier Wen Jiabao's career was spent in local government,' observed UOB Kay Hian associate director Foo Choy Peng. 'He knows the tricks that local governments will use to circumvent [Beijing's] policies.'

The Hang Seng Index nose-dived in the middle of the month on fears for the mainland economy and Middle East security. 'Yesterday was a dirty Monday,' said one broker following a 2.74 per cent decline. The news was no better in the property sector, as sales plunged to a five-month low. Developers, however, remained bullish, with aggressive bidding for a site in Ma On Shan.

Hutchison remained the headlines, and by this stage 3G was seriously threatening the company's bottom line. Cue another earnings magic trick. The company netted $13.7 billion by selling its stake in Proctor & Gamble's China operations. 'Hutchison has given up future upside from a clearly superior asset in China to window-dress its earnings in 2004,' Citigroup complained.

The company was doing everything to win over the sceptics, including a re-branding exercise under the banner '3'. ''3' is not just 3G,' explained 3 Hong Kong managing director Agnes Nardi. ''3' embraces a freshness and simplicity that coincides with our business vision.'

JUNE

A long, hot summer began with a trading suspension for Far East Pharmaceutical Technology. Its shares plunged more than 90 per cent one day amid speculation of a US$80 million loan default. The company's top brass were out of reach in the mainland, with chairman Cai Chongzhen later claiming his doctor had told him not to answer phone calls. The debacle soured investor confidence in so-called 'P-chips', or privately held mainland companies.

Worst hit was Zhejiang Glass, which dived 69.61 per cent in just 35 minutes of frantic trading.

A row was also brewing between investment banks and the SFC over proposals to shift more responsibility for new listings' quality to their sponsors. Under the proposals, sponsors would have to meet stringent due diligence requirements, and even check the work done by outside experts such as lawyers. 'We're not experts by definition, otherwise we wouldn't be bringing in experts,' complained Quam Capital's Richard Winter.

Inner Mongolian milk producer China Mengniu provided a rare bright spot on an otherwise bleak investment horizon when its shares surged 24 per cent on its trading debut.

Meanwhile, some of Hong Kong's most prominent tycoons escaped the summer heat by signing up for a central government-sponsored investment tour of northeast China.

JULY

Hong Kong's hottest July 1 on record did not stop up to 530,000 people from marching for democracy, in a simmering summer of discontent.

IPO speculators too were feeling the heat after garment maker Luen Thai fell 6.72 per cent on its debut, removing any lingering doubts that new listings had lost their allure.

Over at City Telecom, chairman Ricky Wong Wai-kay was in more buoyant mood as he sized up PCCW. Running pay TV over lines already paid for by voice and internet traffic, he said, would be 'dessert'.

As the tenacious company pursued its 'triple play' of voice, internet and television, a ferocious row erupted with PCCW over City Telecom's determination to offer VOIP services over the incumbent's own network.

AUGUST

Hong Kong's phone wars intensified in August when Mr Wong, having suffered suspicious blockages of his new service, invited reporters to his Peak home and announced a $38 a month deal for City's first 5,000 VOIP customers.

Meanwhile PCCW was making moves of its own in tie-up talks with China Netcom. Asked why they were taking so long, deputy chairman Jack So Chak-kwong replied: 'My Mandarin is bad.'

As the summer Olympics kicked off in Athens, factory managers in Guangdong province began to wonder if staff were staying home to watch the games. Reports of labour shortages in the region were met with some incredulity at first, but were not exaggerated.

As power shortages grew more severe and Beijing's austerity measure put pressure on the manufacturing sector, the summer could not end fast enough for some.

HSBC enjoyed August more than most, however, paying 14.46 billion yuan for a 19.9 per cent stake in coveted mainland lender Bank of Communications.

SEPTEMBER SPRING

The Hang Seng Index began its post-summer recovery, hitting a six-month high early in the month on the back of strong property growth, an influx of mainland travellers, strong retail sales and renewed investor appetite for IPOs.

Alas, Hutchison's spin-off of its non-3G assets was not well received, as fund managers baulked at the zero-dividend policy. 'If the spin-off is a good deal, why is Hutchison exiting rather than issuing new shares,' one fund manager asked of Hutchison Telecommunications International.

China Power International fared much better, with big players such as Singapore's Temasek, Henderson Land chairman Lee Shau-kee and others signing up for 20 per cent of the stock.

Early gains were pared back as oil prices began their surge to US$50 a barrel and the Hang Index slipped back below 13,000.

Meanwhile, City Telecom was boosted by Ofta's ruling that it could in fact piggy back VOIP services over PCCW's network. The company launched a free trial of the disruptive technology in September.

The news was not as good for Hong Kong's textile sector when the United States announced it would not hesitate to take pre-emptive action to protect itself form surging imports upon the Multi-Fibre Agreement's expiry in January.

Hong Kong's new air services agreement with the mainland also disappointed analysts compared with those secured by other countries.

'[The air services deal] hasn't opened any of the major routes at all,' complained one analyst.

The SCMP's Rusell Barling wrote: 'It represents a great opportunity for smaller airlines looking to fly to second-tier destinations but access to China's main commercial centres, the criteria by which any agreement is judged, remains highly restricted to Hong Kong carriers.'

OCTOBER

The month began with a tale of two IPOs. China Power International's Li Xiaolin, the daughter of former premier Li Peng, was the toast of the stock exchange as shares in her company surged 16.6 per cent. HTIL's fell 2.66 per cent from its issue price.

Over in Kowloon bay, DBS blamed human error for an embarrassing blunder in which 83 safe deposit boxes and their contents were inadvertently junked during renovations to its Mei Foo branch. The bank offered up-front compensation of $50,000 to affected customers, with an extra $100,000 for those who agreed not to file additional claims. DBS Hong Kong chairman Frank Wong described the incident as 'unfortunate and isolated'.

Over at the Bank of China, it was rice bowls that were being junked. Hong Kong's bad-news bank announced a far-reaching shake-up of its pay and incentive structure. Out went civil service-style job titles and a career-track based entirely on length of service. In came performance-linked pay, with a focus on sales and profitability. 'In the past there were far more people watching the crops than those sowing them,' a bank spokesman said. 'We are now encouraging them to go out and produce more crops.'

Former jailbird Chim Pui-chung completed his rehabilitation after winning election to the Legislative Council, where he again represents the financial services sector. In an interview, he complained about prison food and his lack of hair. 'I don't like sitting in the front [of Legco] with all the cameras directed at my bald head,' he said.

Hong Kong's High Court evaluated the Zhuhai municipal government's main investment vehicle, the Zhu Kuan Group, bankrupt with debts of about $4 billion and dunked it in liquidation. Liquidators faced the task of clawing back assets in Hong Kong, Macau and Zhuhai. 'We are never, ever going to lend money for working capital where the government is the user of these funds,' said on chagrined creditor. 'We learned our lesson.'

With mainland corporate governance thus back in focus, reporters called the Chinese Securities Regulatory Commission for comment on the growing list of miscreants. 'When I was a little child, my mother told me not to speak to strangers,' commission general counsel Chen Dagang said on a visit to Hong Kong. 'When I was older I learnt not to speak to the media.' So much for transparency.

NOVEMBER

Macau 'concept-shares' grabbed the limelight, as the slightest association with the gambling mecca was enough to drive share prices through the roof. Far East Technology was one beneficiary - its price surged 255 per cent in one week after signing a memorandum of understanding with one casino. 'It's insane,' said Atlantis Investment Management managing director Yang Liu. 'I'd exit the moment I realised some gains.'

Another analyst said: 'It goes on until a person looks down and sees how far away he is from the ground.'

Australia's richest man and legendary gambler Kerry Packer joined the fray nevertheless. Mr Packer's Publishing and Broadcasting Ltd (PBL), Australia's largest casino operator, said it would invest US$163 million in a 50-50 joint venture with Macau gambling king Stanley Ho's Melco International Development.

Macau madness spread. The Hang Seng Index surged to a 44-month high in mid-month before breaking through 14,000 mark. Analysts said 'hot' money was behind much of the gains, as a US dollar slump made Hong Kong assets relatively cheap for overseas investors.

Even IPOs were back in fashion. China Netcom rose 10 per cent on its debut, paving the way for similarly strong showings by Air China and ZTE in December.

At the SCMP's Pearl River Delta conference in Zhongshan, Gordon Wu Ying-sheung stole the show with one of the quotes of the year. Asked about his passion for building bridges in Guangdong, he replied: 'It's simple. People hate getting their feet wet.'

DECEMBER

The Port of Singapore Authority's carefully crafted stratagem to finally enter Hong Kong was foiled twice: first when the Dubai Port Authority trumped its bid for CSX's global port assets, and again when New World and CSX exercised their presumptive rights on a deal PSA had negotiated with Sun Hung Kai Properties.

The Hong Kong government began the month in crisis management mode, and stayed stuck there.

SHKP and New World Development provoked a firestorm after announcing their intention to demolish the waterfront Hunghom Peninsula estate, a former Home Ownership Scheme project that critics said the government had off-loaded too cheaply.

After mounting pressure from the community, the developers surprisingly backed down. 'The decision was made after taking into account prevailing circumstances and listening to public opinion,' said New World chief Henry Cheng Kar-shun. 'We do not want to see the community divided.'

It was declared a victory for People Power. Others saw a set-back for Hong Kong. The saga proved Hong Kong was 'the most communist place in China', declared Hang Lung Group chairman Ronnie Chan Chichung.

Mr Lung 'hadn't seen nothin' yet'. The government and Hong Kong's investment community were caught off-guard by the unexpected legal challenge of the Housing Authority's $21.3 billion Link real estate investment trust - billed as the world's largest - by 67 year-old pensioner Lo Siu-lan. Though she lost her challenge and subsequent appeals, her determination to fight to the bitter end forced the government to shelve the IPO on the same morning that chief executive Tung Chee-hwa was scheduled to meet president Hu Jintao in Macau.

The result was a not so private dressing-down of Mr Tung and his cabinet. Thus a year that should have ended on a high note for the government was instead punctuated by a farce. But for most investors and businesses, it was a very good year indeed.