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SCMP Reporter

IF YOU want to invest your hard-earned savings in an ''ethical fund'' in Hong Kong, you are out of luck.

  Hong Kong, with a unit trust industry that recorded sales of $3.59 billion last year, does not have any ethical unit or investment trusts.

  Putting your money in an ethical investment means you want to see your savings grow without profiting from the destruction of the environment, oppressive regimes or animal research.

  Even more disturbing than the absence of ethical investments in Hong Kong is the fact there is little or no demand for them. Not one ethical investment is included in the line-up of 550 funds registered with the Hong Kong Investment Funds Association, a reflection of the prevailing business mentality.

  More than anything, the low priority given to investments that discriminate against particular stocks and shares on moral grounds in Hong Kong is the newness of its marketplace.

  As an investment alternative, ethical investments are a relative newcomer to the financial world, with the first one launched in Britain 10 years ago.

  Although few fund management companies were prepared to put a date on it, no forecasters ruled out their ultimate arrival in Hong Kong.

  In the interim, there are few options for Hong Kong investors who want to screen their investment portfolio.

  Making an offshore investment in a British ethical investment fund is one alternative but you have to be a big investor for it to be worthwhile.

  ''If you've a minimum investment of GBP200,000 (about HK$2.29 million) then it's cost-effective to set up an overseas bond and appoint a broker to manage it for you,'' said Mark Deer, of Britain-based financial adviser Holden Meehan, which has just published the fifth edition of the Guide To Ethical Investment.

  Last year, 6,500 copies of the guide were sold and this year, 10,000 copies are expected to be ordered by investors in Britain.

  ''There are good and bad performers in ethical investments but they compare favourably to non-screened funds, and over five years they have matched the average non-screened funds in Britain,'' Mr Deer said.

  Blue-chip and multinational companies are almost always excluded from ethical investments, leaving most to concentrate on small and medium-sized companies with specific dealings that conform to the selection criteria.

  Mr Deer said one reason why no Hong Kong shares had so far been selected by ethical funds was the difficulty in obtaining accurate information about companies in the territory that fit their criteria.

      When ethical investments do arrive in the territory, they may get a mixed reception. Dao Heng Securities research manager Mark Gallagher said as Hong Kong became more of a service centre for China, it would have more scope for ethical investments.

  The China market is likely to be more problematic, according to Mr Gallagher, who spent several years working for Friends Provident, the first British fund manager to establish an ethical fund.

    ''The Most Favoured Nation argument highlights some of the concerns about human rights in China but there are many other mainland ventures where it would be difficult to trace how your money was being invested,'' he said.

  Indosuez marketing director Dr Mark Konyn said there was no demand for ethical investments in Hong Kong and the industry scene was unlikely to change under the current balance of power between companies and their investors.

  ''Relationships between companies and shareholders are still new in Hong Kong,'' he said. ''It's not until you get shareholders with power, such as the strength of institutional investors, that they can have a say in what the company does.''   ''Ethical investments will go hand in hand with general investor sophistication and company accountability,'' Dr Konyn said.

  Dr Konyn said social issues, such as a greater degree of environmental awareness, would also affect the acceptance of ethical investments.

  According to Jardine Fleming director Richard Mosley, ethical investments are not in Hong Kong because the market is not ready to accept them.

  ''Their absence is really a reflection of the environment we work in and, while there are plenty of other funds to satisfy investor demands, it is unlikely we will see them in Hong Kong,'' he said.

         Mr Mosley said Jardine Fleming considered ethical implications in its own holdings but, as a fund manager, its first goal was to make a good return on investors' money.



Mixed response awaits ethics funds