Stamp collecting can be an alluring investment opportunity. Thousands flocked to the recent stamp exhibition in Hong Kong and estimates suggest there are 250,000 serious collectors in the territory. In the second of a series on collectibles, KAPILA BANDARA reports on the rise of the humble stamp. IMAGINE finding, among your grandfather's belongings, a letter from a British soldier based in Ceylon (now Sri Lanka) more than a hundred years ago. Or discovering, in an aged rusty trunk, an unused two pence stamp of Ceylon issued in the 1850s. If you find such a cover or a stamp, keep it. These rare items could be worth hundreds of thousands of dollars. Then again, you might find a letter mailed in the 1890s through the China Imperial Post from Shanghai to Hong Kong. Such an item, perhaps with a fine strike of the date stamp, could be worth a couple of thousand dollars as well. Mail of yesteryear and stamps of the eras of imperial reign and colonial rulers provide an alluring investment opportunity to those who wander across the pages of philatelic history. Amateurs and seasoned collectors of stamps can transform a childhood fascination into a money-making venture. ''Stamps are an exciting investment. It is what I call a portable investment,'' said Colin Harding, a specialist in philately. ''But you need to keep in mind that stamps and postal history are a good alternative investment.'' Mr Harding operates a major philatelic dealing house, Scotia Philately, in Britain with his partner Robert Hepworth. As part of his service, he also offers investment advice. He was here in Hong Kong for the Hong Kong '94 Stamp Exhibition held at the Hong Kong Convention and Exhibition Centre. Postal history and classic stamps are an ideal investment proposition. For those willing to tread this ground, caution is the most essential guide. Mr Harding said: ''Before building up a collection as an investment, you need to look at the most important factors . . . price, market and rarity.'' Moshe Malamud, head of a major New York-based philatelic house, said the industry needed to stimulate interest among amateurs. ''We need to encourage the small collector,'' Mr Malamud said. Mr Malamud is marketing director of the Inter-Governmental Philatelic Corporation (IGPC,) which acts as an agent for more than 50 foreign post offices, publicising and distributing stamps across the globe. ''An amateur can start collecting on different themes, like history, geography, current events, culture, art, industry, and get serious about the subject,'' he said. Evaluating the market for the potential investor, Mr Malamud described the market here as ''phenomenal''. He estimated there were about 250,000 serious collectors in Hong Kong. The interest in stamp collecting is forecast to increase following the enormous success of the Hong Kong exhibition, which attracted thousands each day, forcing organisers to extend opening and closing times. Scotia Philately's Mr Harding estimated that the clamour for stamps, of China in particular, has ballooned. ''Interest in the stamps of China has gone through the roof. The prices have soared,'' Mr Harding said. But before entering the market, potential investors need to do their homework. ''The ordinary person cannot just buy into the marketplace. You need to be well advised,'' Mr Harding said. An adviser had to ''explore the potential market, research the authenticity, provide proof of rarity and also the right price''. As far as prices are concerned, potential investors can look up catalogues that are detailed and reliable guides to current values of various items. Stanley Gibbons, Scott, Yvert (France) and Christie's are among several catalogue publishers. Specialist references are also available on stamps of China. Gathering historical material and classic stamps ensures a good start for an investor. Postal history involves collecting old letters and manuscripts by important figures who helped shape the world's history. These letters may be from empire builders whose wars defined new global boundaries or correspondence that told the tale of a prisoner of war. Letters despatched by airmail, overland mail, maritime mail and military mail many decades ago are highly sought-after items among collectors. Old letters contain varying elements that add value to the items. Hand stamps, of which only a few samples are known to exist, interesting contents, despatch route, destination and originating post office, date and year of despatch (for example, a lettermailed during the Japanese occupation of Hong Kong), mode of despatch and the cover used (a first day cover, perhaps), are among numerous features enhancing the value of these items. Even a fine strike of a hand stamp may mean it is worth a little more. Gathering classic stamps involves collecting the first three or four issues of a country. ''Such stamps were never issued in large quantities except, of course, the Penny Black. In this case, the potential investor has to be extremely cautious of quality,'' said Mr Harding.