The Hong Kong stock market is anticipating boom times for local companies following the signing of the recent free-trade agreement between the once freewheeling territory and mainland China.

Shares of several Hong Kong film companies have climbed since the Closer Economic Partnership Arrangement (CEPA) was unveiled at the beginning of the month. Those companies that have the most China-facing operations and those with significant video interests have gained the most.

In the last two weeks shares in China Star, which have been sinking all year, rose 37% to HK$0.82 and Universe International Holdings climbed 18% to HK$0.118. Most significant was quoted video distributor Mei Ah which soared 79% to HK$0.26 despite having announced losses for the first half of the year.

The Hong Kong film industry is looking forward to a surge in production activity following the signing of CEPA, which exempts Hong Kong movies from the mainland's import quota of 20 foreign films a year (Screen Daily, June 26).

It also allows Hong Kong firms to set up mainland joint ventures, with ownership of up to 70 per cent, to distribute audio-visual products such as VCDs and DVDs.

"This is a wonderful opportunity for the Hong Kong film industry which in turn will drive development in China," said Film Workshop co-founder Nansun Shi.

However others remain cautious. Shaw Bros' director of film production Lawrence Wong was quoted by the South China Morning Post as saying: "At the moment, Hong Kong filmmakers can enter the mainland market simply by co-operating with a mainland firm. 'People think quota-free means you can freely distribute films and VCDs and control everything in your hands. Companies [will] still need to co-operate with the mainland on film distribution and share their revenue with [Chinese partners] or the Chinese authorities."

Mei Ah's managing director Patrick Tong Hing-chi said: "Filmmakers still have to decide whether the film is for the mainland or a foreign audience. They have to strike a balance before importing a film to the mainland."

*Shares in Emperor Entertainment Group, parent of Hong Kong film producer and talent management group Emperor Multimedia, were last week suspended following the arrest of its biggest shareholder Albert Yeung in connection with an alleged chart fixing scam.