When you name your company after a mythical winged horse, equine exchanges are, perhaps, to be expected.

And Paul Pong, the effervescent boss of a local fund manager, is more than equal to the task as he enthuses about winners, losers and the importance of timing.

Pong, managing director of Pegasus Fund Managers, is justifiably proud of his track record of investment strategies - both entry and exit - and promptly begins to list them:

In March 1990, he advised investors to sell Japanese equities; not long after, the market went into decline for a decade.

Later that year, he suggested investors take advantage of falling stock markets in the wake of the first Gulf War; and accurately forecast that there would be no oil crisis.

In August 1997, his article in Hong Kong Economic Times warned of the growing possibility of a financial crisis in the SAR similar to that of the 1987 crash.

In 1999, he steered investors towards tech stocks and in March the next year tipped that they had reached their peak. The dotcom bubble burst and the Nasdaq went into a decline.

"There are always ups and downs in markets around the world. It is important for investors to grab the right moment to go in or book profits," says Pong, who regularly comments on the investment market in newspapers and on radio and television.

Pong founded Pegasus Fund Managers in 1990. He gives a prosaic reason for the name - it was the Year of the Horse - and the first company of its kind to set up with a strong focus on serving Chinese people worldwide. In 1998, Pegasus gathered together a professional sales team to provide financial services and the next year, Pegasus Financial Services was formed.

Pegasus invests in more than 1,500 funds authorized by Hong Kong's Securities and Futures Commission and provides a one-stop service offering savings plans, fund-portfolio analysis, financial planning and insurance, in addition to providing tailor-made investment portfolios.

And as with any business in Hong Kong today, its focus is firmly on the mainland as well. A decade ago, from 1994 to 1996, Pegasus was appointed as adviser to Guangdong Overseas Chinese Trust and Investment Corporation.

Pong believes that a restructuring of the mainland's finance industry is vital for its continued growth.

"The mainland cannot keep on relying on cheap labour - there are other costs, like cost of capital and raw materials to be taken into account.

"When the cost of materials or capital goes up, margins are squeezed, especially for many of the kinds of low-priced products the mainland makes.

"While it may not have much control over raw materials, in particular, imports, Beijing could reform the financial structure to make the cost of capital lower.

"Financial institutions should be developed with different aims - offering investment funds with high risks but good returns, or funds with long- and medium-term growth. The national social security fund should target long-term returns to serve the pension needs of a greying society."

He says the mainland needs continued and steady high growth to pull millions out of poverty and ensure that the burgeoning middle class continues to prosper.

"The problem fund managers face in Asia is (people have) too many savings, sometimes literally under the mattress or in low-yielding bank deposits.

"This is not good for the economies. The challenge is how to mobilize these savings so that they are more productive and help the economy grow."

State or public finances are not enough, he explains. "Private equity is sorely needed.

"The mainland's social security fund, for instance, should be allowed to invest in private equity. A reasonable proportion of its funds can be invested to ensure the high returns it needs," he says.

Pong uses the analogy of education to illustrate the need for reform. The tertiary level could be fine but you need good primary and secondary education. If corporate governance is good when firms are small, there is no need for concern when they grow.

"If they are professional when they are small, there is no problem when they get larger. You wouldn't have the issues of corporate governance or financial transparency cropping up when they are about to list," he says. Pegasus, and Pong, in particular, arranges training courses and seminars for smaller mainland firms - mostly for free.

"We help with listings overseas, corporate governance and accounting standards. Mergers and acquisitions is another route to growth," Pong says.

Pegasus has been operating an M&A hedge fund for five years and there has been a lot of activity in recent times.

"The mainland hasn't yet leveraged its financial systems, its great pool of people or its money, in the form of investments. Once it does that, it will be a very powerful nation."

(HK Edition 08/18/2004 page16)