YOU may have heard that property prices have been falling and those big developers such as Henderson and Cheung Kong have been forced to reduce their prices to shift their wares. You will also have heard endless quotes from analysts, economists and property agents that while things are a little tough, the property industry is still a vibrant animal that is taking a short breather. Yet look below the surface and the consequence of falling prices has a far more serious effect. Consider for a start, all those family-owned manufacturing companies which fancied themselves as Hong Kong property developers. It is a seductive game for anyone who is slaving away to make plastic toys for export and watching their margins shrink. Toss in 50 per cent equity, buy the land and, as the construction costs start rolling in, visit the bank for the other 50 per cent in debt. All the while, you hope the price of property keeps rising and when the time comes to sell, that leverage of 50 per cent transforms the initial equity investment into a spectacular profit. Helicopters beckon and factories in Shenzhen seem a wasteful distraction. Unfortunately, for those who took the gamble within the last six months, the game has turned against them. First, interest rates turned up, then the banks got restless about their exposure to Hong Kong property and, finally, prices began to fall. As a result there are now a number of firms with half-completed projects needing finance. Into the void came the giant property developers, cash-rich from their stream of fund-raising exercises, to bail out their half-bankrupted little cousins. But this is no game of benign generosity. They are doing so at rates of interest of up to 10 per cent above the bank base rate, which has to be a good bet, we reckon. THE day of the Hong Kong corporate boldly stepping into the United States debt markets and demanding financing at cheap rates is supposed to be accelerating, with companies going through the rating process from the likes of Standard and Poor and Moody's. The trouble for any Hong Kong firm remains that it cannot obtain a rating in excess of the sovereign rating held by the territory, as the Mass Transit Railway Corporation found out when it was downgraded to a single A rating a while back by Moody's. However, we hear that in the case of CAPCO, the subsidiary of China Light and Power, a way round the problem has been found. If you are a pension fund manager who fancies a slice of CAPCO debt, you will be told to contact Standard and Poor, which has a sort of off-the-record rating that is higher than the official A rating. THE last few weeks have produced a persistent rumour about Exchange Square, which seems to grow daily. Talk was that Salomon Brothers managing director William Phillips was to leave the firm and join Chris Heath, the man credited with building the modern Barings, in a new venture which was being described as a ''boutique emerging markets investment bank''. When contacted, Mr Phillips categorically denied the story, but wondered whether the rumour was being put about by his former Barings colleagues.