Hutchison Whampoa's benchmark 2011 bonds, however, have been relative wallflowers, rising only 6.96 per cent. That reflects investor concerns about more Hutchison bonds coming to the market and how the conglomerate will spend US$16.7 billion in Europe alone on third-generation (3G) mobile-telephone technology by 2005.

In fact, Hutchison bonds have seen their spread over United States treasuries widen to 255 basis points from 160 points at the start of the year. That negative performance has been more than offset by treasury yields declining to lows not seen since 1958.

Should investors be worried about unproven 3G raising the conglomerate's credit risk profile or is it all in the price? This question faces fund managers weighing up Hutchison's latest bond offering of up to US$2 billion.

Standard & Poor's is keeping an open mind on Hutchison for now. It has a negative outlook on Hutchison's A rating and plans to keep a watchful eye on how the 3G story unfolds. The company will begin its roll-out in Europe next month.

According to ING Financial Markets, S&P will downgrade Hutchison one notch to A-minus next year. But it believes a downgrade of two or three notches is already factored in.

Industrial firms on A-minus ratings in the US were 110 basis points above US treasuries, ING Financial Markets debt research director Eden Wong said.

For fair value, add a 30-basis-point risk premium for Hong Kong, 40 basis points for Hutchison's complex corporate structure and 40 for its exposure to the beleaguered telecommunications industry.

Fair value for Hutchison's bonds was 205 basis points above treasuries, implying the 3G worries were overdone, Mr Wong said.

Working in Hutchison's favour as it battles to get its bond away will be a firm local bid.

Mr Wong said: 'Banks in Hong Kong are flooded with cash, creating strong potential demand for debt issues of leading conglomerates. With its strong market position in various industries and well-regarded management team, we consider Hutchison to be one of the strongest non-government corporates in Hong Kong.'

Hutchison and its fans make much of its low net debt position of US$5.5 billion, giving a debt to capital ratio of 12.2 per cent.

But stress also needs to be put on the group's US$20 billion in gross debt, critics say, with the difference from net debt due to US$15.57 billion held in cash and liquid assets.

There is plenty of debt already in the market but cash generation to repay it is not improving.

Revenues grew 14 per cent in the first six months of this year but earnings before interest tax, depreciation and amortisation were about flat on last year.

'If you look at the cash generation, most of it comes from buying and selling companies,' an analyst said.

'Take a look at the cash flow from operations. There is very little there and it has been negative of late. The company is cash-flow negative even before it starts investing in fixed assets.'

With financial markets in a slump, it would be difficult for Hutchison to trade assets to boost cash generation, the analyst said. Rather than selling assets, Hutchison has been acquiring them and faces cash outflows of US$6 billion over the next 18 months, including Cheung Kong Infrastructure Holdings' joint acquisition of CitiPower with Hongkong Electric Holdings for HK$6.68 billion.

For the critics, the potential for Hutchison's outstanding debt to go higher as it funds 3G means the markets are right to take a sceptical approach.

Supporters such as Mr Wong accept outstanding debt will increase until 2005 but say investors should not be worried.

'Even though Hutchison's 3G business is likely to incur operating losses during its first few years, we believe the company's financial profile will remain intact,' Mr Wong said.

Graphic: hut30gbz