GRAB a look at any Hong Kong stock market listing prospectus, and somewhere there will be a letter from the sponsoring merchant bank, normally a gang of European or American spivs. 'We listened to your pitch, read the accounts your accountants prepared for a fat fee, and have rung our mates in the market,' it might well read. 'On the basis that all your assumptions are correct and all your statements are true, and for which you the directors are solely responsible, then the forecast probably is okay and has been properly made.' What it means is that sponsors of dodgy or dirty companies, or companies with dodgy or dirty directors, are home free. 'Not me, mate,' they say as their white socks slink towards the lift. 'The directors are responsible.' The results are out there for everyone to see. In the past two years, Hong Kong has seen floats fixed by premier institutions, assets have been found to be fictitious, and directors have been found who are as bent as nine dollar notes. This week Denway Investment, Egana International (Holdings) and Goldlion Holdings turned out to have miscreants in the boardroom. The listing division appears to have made some kind of slip in its vetting. Add these firms to Win Win Armed Robbery, Dodgy Goods Distribution Inc and Ming Pao Handguns and Cheque Kiting, and the list gets longer. The way forward is obvious enough - there has to be a duty of reasonable care on the sponsors, and it has to be enforced by the regulators, and it should protect investors from disadvantage by improper disclosure. Meanwhile, more proof that the biggest winners from privatisation are the civil servants who end up at the helm of a public firm. Take Larry Yung Chi-kin, for example. CITIC Hong Kong, the private China state enterprise which owns 41 per cent of CITIC Pacific, this week bought his options for $200 million. Mr Yung did not even need to find the $364 million needed to buy the 28 million shares at $13 a time, when CITIC Pacific shares were worth $20.10 each. The chairman of British Gas recently was the subject of heavy criticism in Britain for accepting a massive pay rise after his company was sold to investors by the government. If he could see what they get away with in China, he would weep. However, Mr Yung has made some pretty good investments. One of them was a 12 per cent slice of Hongkong Telecom, which announced its year-end results this week. Profits were up by 15 per cent to $8.7 billion, but the news was not all good: international revenue growth was slowed considerably. This was partly a result of changes to tariffs to the United States, Britain and other major call destinations. It also was a result of slowing of China traffic growth, first noted in interim results. In past years, China traffic grew 25 per cent or more a year. The reason for the change seems to be a massive increase in China-call charges after unification of yuan exchange rates early last year in 1994. Hongkong Telecom executives said they were aggressively marketing various things that certainly were not calling-card services, so that customers could pay for calls from China to Hong Kong, in Hong Kong. Which is fine, but the company gets terribly picky about its own evil monopoly - and if anyone at Telecom wants to tackle Hindsight on the word evil, get Lord Young to defend monopoly systems over the free market. Still, it is worth knowing that it is cheaper to make a reverse charge call from Beijing to Hong Kong than to dial direct. Shifting focus out of Hong Kong, Hindsight has worked out why the Japanese flag has a gigantic red blob in the middle - it is the red ink pouring out of its corporations, banks and financial institutions. This week Nomura said it achieved a profit of only 6.8 billion yen (about HK$600.9 million) for the last fiscal year, down 87 per cent on the previous year. The three other Big Four broker firms - Nikko, Daiwa and Yamaichi - all said they were making losses last year. Also this week, 10 of Japan's mid-range financial institutions reported results which were messy. Sanyo Securities managed to lose 34 billion yen, and a group including Sanyo, Cosmo, Kankaku and Wako lost a total of 166.5 billion yen. They weren't the only Japanese staining the sand red. Sony lost HK$26 billion, mainly because of huge write-offs from buying Columbia Studios in the US. Part of Mitsubishi is facing bankruptcy over the Rockefeller Centre in New York, another disastrous mid-1980s purchase. The revival of the Japanese economy can sometimes look as if it is receding, not coming closer. Any revival can only be put at risk by trade war with the US - not that anything much ever happens. There seem to have been a million trade wars between that pair. They never really amount to much as both sides have too much to lose. It is fun to watch senior ministers sling mud about and use all kinds of harsh language before imposing devastating anti-dumping tariffs on dolphin saddles and other aquatic animal accessories, rubber bicycle chains and solid-state egg-timers, etc. Perhaps things will be different this time, though. The US deficit with Japan soared to US$6.14 billion in March, a big chunk of America's total trade gap of $9.12 billion for the month. Controlling and eliminating trade deficits is an important part of any attempt to narrow America's budget deficit, so the stakes rise for the US every month.