Transition for a Hong Kong Giant

One of the most powerful symbols of the old Hong Kong appears to have found a niche in the new.

Since the early 1980s, when London and Beijing began negotiating the terms of Hong Kong's return to China (now about a month away), analysts and investors have wondered about Jardine Matheson group - king of the old British trading companies that founded this colony. Would it survive the change?

And until recently, the public signs were not good. China's official Xinhua news agency denounced the conglomerate four years ago for publicly supporting British Governor Chris Patten's democratic reforms.

Xinhua accused Jardine of "an anti-China attitude" and attempting to "undermine the smooth transition" to Chinese rule.

In retaliation, China shut Jardine out of Hong Kong's expanded port, critical to Jardine's business.

Jardine also roused China's ire by moving its corporate charter to Bermuda in 1984. Then the company pulled out of the Hong Kong Stock Exchange in 1994 in favor of arch-rival Singapore.

Both actions showed little confidence in the territory's future.

Two stock deals

But now, the company's finance arm, Jardine Fleming, has won two prestigious contracts to underwrite stock offerings of Chinese state firms. It will sponsor the new listings, in Hong Kong, of China's largest cementmaker, Ningguo Cement, and state coal firm Yimeng Coal.

Competition to underwrite the stock of Chinese companies in Hong Kong is particularly fierce, because investors are practically knocking down doors to buy shares.

A recent offering - by the overseas investment arm of the Guangdong provincial government (a province in southern China) - was heavily oversubscribed. Demand for the shares exceeded supply by almost 900 times.

Jardine officials have downplayed the news, perhaps to avoid drawing attention to their absence from China's financial activities, despite maintaining the largest presence on the mainland of almost any investment house.

Or perhaps the group does not want to risk provoking China by gloating over the deals.

Still, Merrill Lynch has upgraded its earnings forecast for the Jardine Matheson group as a result of the news.

And Jardine officials say they hope the contracts signal a return to a "level playing field."

"Any problems that Jardine Matheson has had in the past on the China front are history," says James Bruce, head of Hong Kong-China operations at Jardine Fleming, the finance arm of Jardine Matheson.

Stake for China?

Jardine's return from the cold follows a year and a half of talks between Jardine executives and Chinese officials "at the very highest levels," Mr. Bruce says.

If rumors circulating in the market are to be believed, Jardine will soon be selling part or all of its property arm, Hongkong Land, to a mainland firm.

A stake in Hongkong Land could be a matter of national pride and income for China. The company owns some of the best buildings in the city.

And Beijing may not like a company so associated with the colonial past owning such an important chunk of the city.

A 'NOBLE HOUSE' FOUNDED ON OPIUM

HONG KONG

No company has influenced Hong Kong's history the way Jardine Matheson has.

A decade before this rock on the south China coast became part of the British empire in 1841, William Jardine was trying to sell opium in China and pushing Britain to force the Chinese to trade. His efforts led to the first Opium War and the subsequent cession of Hong Kong island to the British.

Jardine and his descendants became the epitome of the territory's taipans, or big bosses. James Clavell based two epic novels - "Taipan" and "Noble House" - on the company.

Jardine still has a formidable presence in the territory: It's No. 1 in annual sales, with large property and finance arms.