YOU read it here first: Hong Kong is to computer disks what the Golden Triangle is to heroin. According to the European Commission (EC), Hong Kong is being used as a front to flood the world with cheap Chinese computer disks so they can evade anti-dumping duties. The EC this week said it was going to look into allegations that manufacturers from China, Taiwan and Japan are diverting their products so it appeared they originated in other countries, after heavy dumping duties were imposed on them in 1993. According to the Committee of European Diskette Manufacturers (Diksma), Hong Kong, Macau, Canada, India, Indonesia, Malaysia, the Philippines, Singapore and Thailand have been cynically used as transshipment points, performing a minor role in the disk manufacturing process to justify a change of export origin. Diksma would not say something like that just to protect its own market share from competition in what is becoming a tough high-volume, razor-thin margin business. If there's one thing that can be said of the European Union and units thereof, it has always been one to promote a free market, the total abolition of tariffs, agricultural subsidies, and an end to the building of ludicrously highly-priced military hardware designed to prop up an ailing military industrial complex. Anyway, Diksma says that while imports from China and Taiwan fell to four per cent of market share in 1994 from 20 per cent in 1992, the combined market share of the alleged front countries rose to 36 per cent in 1994, from 21 per cent in 1992. So it called in Inspector Clouseau, and decided that 3.5 inch micro-disks made in China and Taiwan were being transshipped. Companies allegedly involved in dumping were reported to the EC. Bad week for Hanny THE EC's action could be another nail in the coffin of Hanny Magnetics (Holdings), coming as it did hard on the heels of yet another corporate restructuring, and help from long-suffering shareholders. One-time rescuer of loss-making Memorex, Hanny, now feels about cash injections the way haemophiliacs feel about blood transfusions. Hanny nonchalantly mentioned in its annual report that one of its subsidiaries 'is under investigation regarding the country of origin of its import into the European Community of magnetic media products manufactured by another subsidary of the group'. Hanny recently sent out circulars to shareholders warning of even more losses after July 31 this year - it lost HK$100 million in the four months to July 31. Last week, Hanny's chairman and founder Wong Sun said the company's performance had picked up, although he was more sanguine than auditors Deloitte Touche Tohmatsu, which qualified the company's annual report. The worst came this week, when Hanny plummeted to 13.7 cents after being suspended from trading for three weeks, and the Securities and Futures Commission (SFC) was holding talks with the Peregrine group about the unloading of shares between September 21 and October 4. The disposal was less than a month before Hanny informed shareholders of further losses in its rights issue and new share subscription circular. Peregrine Capital was underwriter for the exercises to raise about HK$703 million for the beleaguered floppy disk manufacturer. The SFC has also been inquiring about the Hanny chairman's unloading of 75.5 million shares between September 26 and 29. Peregrine Investments Holdings, an associate company of Peregrine International, disposed of 42.5 million shares from September 26 to October 4 for 16.6 cents to 25 cents per share. Tough talking LEGISLATIVE Councillor Chim Pui-chung spoke for us all this week when he grilled Financial Services Secretary Rafael Hui on the codes of practice laid down by the Securities and Futures Commission (SFC) on Wednesday. Never one to shy away from the tough questions, Mr Chim asked Mr Hui if such codes of practice and guidelines would become an alternative set of laws, if the SFC would be requested to be more open and transparent by letting the public know about its power and criteria for discharging its functions, and if there was any mechanism to prevent the abuse of authority under those codes and guidelines. The codes of practice and guidelines do not have the force of law, Mr Hui said. A collective sigh of relief may have emanated from Legco members fearing that they were about to be sidelined in the legislative process. Mr Hui said there was a system of checks and balances to prevent abuse of authority within the SFC, and alleged abuses of authority could be referred to the courts. This will come as reassuring news to all those fearing the empire-building ambitions of the SFC. Not content with policing the market and seeking to stamp out rat-trading and unlicensed leveraged foreign exchange trading, the SFC has even resorted to issuing codes of conduct. Where will it end? Get 'em young HINDSIGHT is glad to see that the Government, not content with stamping out unlicensed leveraged foreign exchange dealers and rat-traders in the territory, is moving to deal with another threat to Hong Kong's reputation as a clean, open market. An 83-year-old man was fined last week for gambling in a park in Hong Kong, along with three others - two in their 60s and one spring chicken in his 50s. You've got to get them young before they start opening small brokerages or funnelling their winnings from Russian poker through Macau. Palpitations for the heart of Asia CATHAY Pacific must have been clawing frantically at its chest this week as The Heart of Asia was hit by palpitations. On Monday, it was revealed that China National Aviation Corp (CNAC) has hired Lew Roberts, a Cathay Pacific alumnus, to help set up a new airline. Mr Roberts, who quit Cathay Pacific in 1984, then launched Hong Kong Dragon Airlines, is expected to be an asset for CNAC (Hong Kong) in its bid to get an Air Operators' Certificate. Tuesday saw a report that the new airline may be called China Hongkong Airlines and be cleared for take-off early next year. Just when it must have thought the week was over, Cathay must have been knocking back the aspirin to relieve the migraine which followed the news on Wednesday that Hong Kong and Taiwanese authorities had reached a preliminary understanding on a new five-year commercial air agreement. If approved, new airlines, probably Eva Air, will be able to compete with Cathay Pacific, which previously only had to share the route with China Airlines. Undeterred, Cathay Pacific is spending HK$3.5 billion on a new 10-storey headquarters and a 25-storey building to offer hotel-style accommodation to its staff. Downgrading is uplifting at Citic ONE week after rating agency Moody's Investors Service downgraded the mainland parent of Citic Pacific, bankers thumbed their noses at Moody's and thrust money at the group. In the market for a mere HK$2 billion, would-be underwriters have offered Citic Pacific something like $4 billion and forced Citic Pacific to take on another $400 million mad money. Instead of plummeting on the news that Moody's was feeling a touch liverish about mainland-owned entities and stocks, Citic Pacific is actually outperforming the Hang Seng Index, and rose after the downgrading was announced.