The news came a day after Moody's downgraded the debt ratings of its ultimate holding group, China International Trust and Investment Corp (CITIC).

The rating indicates CITIC Pacific offers adequate financial security, but may be lacking certain protective elements or may be characteristically unreliable over any great length of time. This rating is lower than the A3 level achieved by other blue-chips like Swire Pacific and Sun Hung Kai Properties.

Moody's said the rating for the listing vehicle had incorporated 'the moderate balance sheet and cash flow leverage', which also reflected 'the company's increase in investments in higher risk infrastructure projects in China'.

The comments were apparently unacceptable to the company, which claimed that Moody's rating was part of the rating agency's cautious view of the overall China economic situation.

CITIC Pacific managing director Henry Fan Hung-ling said: 'That's why they (Moody's) downgraded CITIC and the state-owned banks in China like the People's Construction Bank of China.

'We do not agree with Moody's opinion that infrastructure projects in China are 'higher risk'.

'Indeed, we have the strength to have secured quality infrastructure projects in China with reasonable guaranteed return.' Dharmala Securities research director Ben Kwong Man-bun said: 'The company's mainland infrastructure projects have provided a steady income source for the company.' CITIC Pacific has a number of infrastructure projects underway, including two bridges and a tunnel in Shanghai.

It also has power stations at Ligang, Jiangsu province and Henan province's Zhenzhou.

The mainland infrastructure projects have generated more than $160 million, or 12 per cent, of CITIC Pacific's interim profits this year.

Mr Kwong said he was not worried about CITIC Pacific's infrastructure projects in China because the investments were relatively small compared with the portfolio in Hong Kong.

Business in Dah Chong Hong, the car distribution vehicle with sales both in Hong Kong and China, was expected to be bottoming out, Mr Kwong said.

'More concern should focus on the company's projected increasing gearing through its recent aggressive acquisitions, and the expected slowdown of earnings growth in its Hong Kong investments,' he said.

CITIC Pacific's income is sourced from several of its long-term quality investments, including a 12 per cent interest in Hongkong Telecom, 10.5 per cent in Cathay Pacific, and 46.2 per cent in Dragonair.

They also generated high revenue, accounting for more than 40 per cent of the company's annual earnings.

Some analysts questioned the company's ability to match the high earnings growth it had seen over the past few years.

CITIC Pacific's organic earnings growth over the years was driven by new acquisition of investments.

Its earnings jumped sharply in 1992 to 1993 after buying shares in Hongkong Telecom from its parent.

The outcome was repeated in 1994 earnings when it bought a 50 per cent interest in the massive Discovery Bay development. Analysts said projected interest expense increases might slow down the firm's acquisition moves, limiting the high growth potential in its earnings.

CITIC has $8.5 billion borrowings or a gearing ratio of 20 per cent. It is proceeding with its HK$2 billion borrowing for its Tamar Basin property project.

More money is needed for its joint-venture property development above the Mass Transit Railway's Tsing Yi station.

James Capel Asia analyst Carl Wong, who recommended that investors hold the stock, said investors were not in favour of the company's recent sale of a two per cent stake in Cathay Pacific.

There was market confusion over the company's corporate strategy after it reduced the long-term investments which had secured a steady income source, he said.

Mr Kwong said some investors might be against CITIC Pacific's heavy investments in the property market, given the downturn in local property market.

By the end of last year, property investments accounted for nearly 25 percent of the company's investment portfolio.

This did not include its recent investment in the Tamar Basin site and its 20 per cent interest in the MTRC project at Tsing Yi station.

Mr Kwong said the company would reap a good return in the long term.