Hong Kong - Casino operator NagaCorp is facing troubled waters as it races towards

its second attempt at listing on the Hong Kong Stock Exchange in a bid to raise up

to US$77 million.

The prospect of the US Federal Reserve contining its policy of raising interest rates

and risk eroding growth in the world's largest economy has resulted in stocks markets

around the world taking a beating, and Hong Kong is no exception.

As the Fed raises rates other central banks are forced to follow suit to maintain

parity and support their currencies. This raises the cost of borrowing at home and

crimps spending habits, and that's another brutal combination that no stock market

can afford to ignore.

Since the rout started in mid-May, when many markets were trading at record highs

and investors were receptive to further listings like Naga, the sell-off has resulted

in falls of between 15 and 30 percent.

Billions of dollars have been written off the value of benchmarks, like Hong Kong's

Hang Seng index, and rising interest rates mean bonds and bank deposits are now emerging

as more attractive investments than the stock market.

This could prove troublesome for Malaysian tycoon Chen Lip Keong, who reportedly

wants to make the Naga share sale before a placement is made in Hong Kong by Macau

tycoon Stanley Ho's giant Sociedade de Jogos Macau (SJM) in July.

The size of Ho's US$1.9 billion placement will dwarf the Naga offer, and Ho's statesman-like

position among fund managers will ensure enough capital has been allocated to meet

the costs of SJM's raising - even amid a stock market rout.

SJM intends to list in July and this threatens to leave Naga out in the cold when

it comes to attracting funds from the capital markets.

Hence Chen's rush at the worst possible time since Naga won an appeal from Hong Kong

stock exchange regulators to list earlier this year.

That appeal was hard fought and goes to the heart of Cambodia's international reputation

for corruption.

Previous efforts to list in Hong Kong, and in Singapore, had been blocked by regulators,

partly due to a lack of internal controls within the company to address money laundering

risks.

However, in a rare victory for Cambodia, Naga won the appeal in Hong Kong after Phnom

Penh joined the Asia-Pacific Group, an alliance of 28 national governments working

to stem cross-border money laundering.

NagaCorp owns the only legal casino operating in the Phnom Penh and according the

reports notched-up annual revenue of US$ 61.7 million in 2002. Most of its gamblers

come from Thailand, China, Hong Kong, Malaysia and Singapore.

In the grander scheme of markets Naga remains a minnow in terms of earnings and the

size of its listing, and unless signs of slowing US interest rate hikes emerge to

sooth investor anxiety, the Hong Kong listing could prove much harder than recently

thought.