With box office for local films down by nearly 25%, last year marked a low point for the Hong Kong film industry. So it's hardly surprising that filmmakers are now revisiting familiar material.

At least three sequels are set to start shooting in Hong Kong over the next few months while several more are in the early stages of development.

The most high-profile of these are the prequel and sequel to recent blockbuster crime thriller Infernal Affairs. After selling English-language remake rights to Warner Bros for a record-breaking $1.75m, Hong Kong studio Media Asia is now turning the film into a trilogy with the prequel set to start shooting at the end of April and a sequel planned for next year.

Also due to start shooting in the second quarter is a sequel to last year's horror hit, The Eye, produced by Hong Kong's Applause Pictures.

Hong Kong-born, Thailand-based directors, Danny and Oxide Pang, will again direct from a script by Jojo Hui. Applause is also developing a second installment of pan-Asian horror omnibus, Three, which this time around may involve a segment from Japan.

In addition, a sequel to last year's romantic comedy, Love Undercover, directed by Joe Ma, is set to start shooting next month and a third installment of Feel 100%, also a romantic comedy, is already in production.

A sequel to last year's big-budget English-language production The Touch, starring and produced by Michelle Yeoh, is also in development, although Yeoh's next project will be The Masked Crusader, about a female superhero who was popular in comic books and movies in the 1960s.

Even though box office take for local films declined by 24% last year, Infernal Affairs gave Hong Kong filmmakers a much-needed boost, taking $7m (HK$55m) and topping the box office chart for 2002.

Unlike the majority of Hong Kong productions, the film went through a lengthy development process and attention was focused on the script, visual effects and acting. As one local executive observes: "Infernal Affairs proves that a carefully planned film can still pull in audiences, despite the various problems that the [Hong Kong] industry faces."

Indeed, despite the gloom that settled over the industry last year, there are several other reasons for Hong Kong to take cheer as it heads into the year of the goat. Infernal Affairs wasn't the only hit over the Christmas period - Zhang Yimou's Hero, a Hong Kong-China co-production, grossed an impressive $3.5m (HK$27m), while Applause's off-beat comedy, Golden Chicken, took $2.2m (HK$17.3m) thanks to strong word-of-mouth and an innovative marketing campaign. Total box office surrounding the Chinese New Year holiday period (Jan 31 - Feb 3) was down by 15% compared to 2002, but the two domestic releases - China Star's Love For All Seasons and Golden Harvest's My Lucky Star - both outgrossed the top two Chinese New Year releases in 2002.

The expanding Chinese market is also an encouragement to Hong Kong filmmakers. "Last year was a bad year for Hong Kong, but the market is much more buoyant now," says Celestial Pictures CEO William Pfeiffer. "It's not just because there's been a few hits at home. China is opening up more now than in the past, and there's more potential revenue, particularly if you co-produce with Chinese companies."

Hong Kong filmmakers are also looking forward to the introduction of the "Film Guarantee Fund" which is scheduled to launch in April after receiving the final stamp of approval from Hong Kong's Legislative Council.

The scheme will underwrite up to 50% of bank loans made to filmmakers with a proven track record, up to a maximum of $333,400 (HK$2.6m). More than 200 Hong Kong banks have been invited to participate.