A BIG Christmas gift was handed to those property giants who had the guts and financial muscle to buy ahead of last week's news that the Government had decided to impose new plot ratios in certain parts of Kowloon. Long before the Government made the announcement, the shrewd ones had begun gathering development sites in those districts likely to be covered by the re-zoning. To the developers with huge land banks in the areas, the change means big money as higher plot ratios suggest they will gain more developable, and thus saleable, floor area without paying a penny. However, to say that the extra benefits do not include some risk is an over-statement. While it is true that the plot ratio re-zoning has been long awaited, since the announcement that the airport would be relocated a few years ago, it still involved a great deal of speculation on the move's timing and the new zones' locations. Any wrong bet would incur substantial losses as the re-zoning could result in lower plot ratios and trimmed development space. Conglomerates such as Sun Hung Kai Properties and Sino Land appear to be the winners in the money game. while Cheung Kong and New World hardly scored, given their thin land bank in the new zones. Apparently the re-zoning, which also aims at speeding up urban renewal, tends to favour the bigger developers. With the residential sites above 400 square metres getting a plot ratio of 7.5, and the ones under 400 sq metres getting only six, the new scheme was designed to encourage mergers and acquisitions in those areas with scattered holdings. In this respect, a property company such as Henderson Land is expected to fare better than its counterparts, given its long experience in collecting ownership of the old buildings. THE acknowledgment by Securities and Futures Commission chairman Robert Nottle last week of the potential conflict of interest for new flotations using the same merchant bank as both underwriters and sponsors should not be taken lightly. In any new issue, sponsors or financial advisers demand as high a price/earnings multiple as possible, while underwriters want one as low as possible. It is typical of the listing candidates in Hong Kong that they use the same firms as sponsors and underwriters. It seems Mr Nottle was just stating the obvious. But if it is a long-standing issue, it is still an issue, and should be dealt with by the market regulators. The ideal thing to do would be to make it compulsory for the companies to appoint separate sponsors and underwriters. But given the limited number of merchant banks in the financial sector, this suggestion is hardly realistic. Hong Kong's new flotation market is mainly shared among several merchant banks with strong brokerage arms, in something of a cartel situation. Most of the time the sponsors can have very substantial bargaining power over the pricing of the new issues. The stock exchange is understood to be considering a book-building or tender system for the new issues. But there are other means also worth examining. For instance, companies with flotations above a certain level may be asked to appoint more underwriters, which would help usher in more second opinions on the pricing. Also, the market regulators could consider imposing a limit on the portion of new issues a sponsor could underwrite for any flotation.