WHAT are worth more per square centimetre than a Picasso painting, more per gramme than gold? Rare postage stamps. More compact than paper money and at times much more valuable, stamps have attracted collectors since the first, the British 'Penny Black', was issued in 1840. The market for Chinese stamps, including imperial China, Taiwan, mainland China and Hong Kong, is the hottest in the world, experts say. Fuelled by fears that the 1997 handover will introduce millions of mainland collectors bidding for Hong Kong stamps, the market for Hong Kong stamps has risen an estimated 50 per cent in the past year alone, say the dealers in the territory. 'It has rocketed,' said Jeff Schneider, director of Christie's Asian stamp division. 'The prices have shot up so fast that some people think it's simple speculation, but I think it is due to a strong collector base.' Michael Goldsmith, a London stamp dealer specialising in Hong Kong stamps, said: 'Stamp collecting is just an extension of investing in the stock market.' Even in the West, stamps are viewed as legitimate investments. Bloomberg Business News, better known for its stock market information, also tracks stamp values through its Stampfinder service. For all the popularity of stamp collecting in Asia, the first great collectors of Chinese stamps were Westerners. The first Hong Kong stamp was introduced in 1862; as a British territory, its stamps featured the head of British Queen Victoria. But with the minchu postal system already in place, China was as loathe to adopt Western ways in this as it was in other aspects of life. The first Chinese stamp was not printed until 1878, though the minchu system, which relied on direct payment to the postman by the sender or the recipient, lasted until the 1920s, according to Mr Schneider. 'A lot of the surviving old Chinese stamps are addressed from one Westerner to another,' he said. During China's many political and economic upheavals this century, stamps served as a valuable hedge against inflation. Stamps helped more than one fleeing refugee to start a new life. Stamps are still a good investment, but their size is valued less for its portability than for the little space they take up in the crowded flats of most urban Asians. 'Stamps are my retirement fund,' collector Jason Ma said. It took Mr Ma two years to convince his wife that his hard-earned salary as a Macau civil servant was being invested wisely in stamps. Most collectors like Mr Ma prefer to gather as complete a collection from one country as possible. Mr Ma used to have three complete sets of Macau stamps - from the 1880s to the present - but sold one last year to a Hong Kong dealer for $80,000. Other dealers prefer to amass stamps in the same category or 'topic' from many different companies - perhaps depicting birds, fish, or heads of state. But the value of a single stamp could eclipse a painstakingly gathered collection. Experts say a stamp's value is less dependent upon its artistic quality than, in decreasing order, its rarity, condition (mint condition or used), and historical significance. Stamp errors are prized for their novelty and rarity. One famous American 1918 stamp mistakenly depicting an upside-down biplane is today worth at least US$150,000. Mr Ma owns a Macau stamp circa-1900 that was mistakenly printed '5 avos' (Portuguese unit of currency) instead of 10 avos. He bought the stamp for $30,000 two years ago and figures that it is now worth $60,000. Commemorative stamps are also popular with collectors. A Taiwanese company is distributing stamps honouring late pop singer Teresa Teng. Issued by the country of Grenada, the stamps are limited issues costing up to $2,300 for an oversized 24 carat goldleaf stamp. Printing stamps is the closest thing to printing money, and nobody knows that better than the Hong Kong Post Office. Last fiscal year, the GPO earned $96 million from releasing five special issues aimed at collectors, almost four per cent of its total revenue. The print run for each issue, however, is kept secret in order to discourage speculation and hoarding by dealers, said Y.F. Chan, Controller of the GPO's Philatelic Bureau. Hong Kong collectors nevertheless grumble that dealers are preferentially treated, because they can pre-order large amounts of stamps and then quickly sell them at a much higher price. Last week was an active one for the territory's stamp collectors. A Christie's auction on Wednesday grossed $12 million in stamp sales, including $410,000 for a single stamp from 1914. A five-day stamp exhibition in Wan Chai drew crowds to haggle with the 50 international dealers there. Also being bought and sold were bits of 'postal history', encompassing envelopes, postcards, postmarks, routes and rates. Although more esoteric, postal history is equally popular and just as financially rewarding. 'Because of this cancellation mark 'Damaged by sea water', this is worth more than $1,200,' stamp dealer Lawrence Chui said, pointing at an envelope. 'Without it, it's worth only $50.'