KUMAGAI Gumi Co, the Japanese parent of Kumagai Gumi (Hongkong), is selling down its 29.3 per cent stake in the Hongkong construction firm to raise $664 million. In a sale of 80 million existing shares, Kumagai Gumi Japan, Japan's sixth-largest construction firm, will reduce its stake in one of the territory's leading construction operations to 6.4 per cent. The sale represents the lowest holding by Kumagai Gumi Japan in the Hongkong listed company for five years and the first major contraction of the Japanese group's overall operational local interests in 31 years. Mr Yu Ching-po, Kumagai Gumi Hongkong's founder, deputy chairman and managing director, is proposing to buy back into his own company; increasing his personal stake from 13.6 per cent to 19.3 per cent. The sale of $1 shares has been agreed at $8.30 each, an 11.2 per cent discount to the close yesterday and a price-earnings multiple of 9.1 times prospective earnings in 1993, according to Estimate Directory data. Mr Yu is taking up 20 million shares while outside institutions are taking the remaining 60 million shares. The shares are being placed without the right to the final dividend announced by the company in February, for the year ended September 30, amounting to 12 cents a share. After adjusting for the dividend omission, the sale price represents a 10.1 per cent discount to the closing price. Kumagai Gumi in Japan has suffered since 1990 from a major downturn in domestic economic activity. The company's credit rating attached to a number of Euroyen bonds and a series of convertible bonds was downgraded by Japan Bond Research from A-plus to A-minus last September. In December Moody's assigned a B1 rating to long-term debt at Kumagai Gumi Co. Crosby Securities research head Archie Hart said: ''The reduction of the parent's stake will be good for the stock as Kumagai Gumi's problems in Japan are affecting the perception of investors towards the Hongkong construction company.'' Net profit at Kumagai Gumi Hongkong rose 14.9 per cent to $250.25 million, below market expectations, for the 12 months to the end of September. In November a consortium led by the group was awarded a $1.64 billion contract to build the Lantau Fixed Crossing (Kap Shui Mun/Ma Wan Viaduct), a core project of the Chek Lap Kok airport programme. The current sale of shares leaves Kumagai Gumi Co with 22.3 million shares in the Hongkong firm, through which it has undertaken prestige projects including the construction of tunnels throughout the territory and the Bank of China Building in 1988. Kumagai Gumi Co was the major founding agent in the listing of Kumagai Gumi (Hongkong) in 1987 during the public offering of 67 million shares at $2.50 a share, representing a prospective earnings multiple of 7.1 times. The transaction was the first listing of its kind, with the Japanese parent on the territory's exchange since 1973. Kumagai Gumi Co won its first contract in the territory in 1961, a $41 million deal in which Mr Yu was a subcontractor. The Hongkong construction arm was formed by Kumagai Gumi and Mr Yu in 1973 out of a firm owned by Mr Yu. According to Wardley Data Services, the new group was intended to represent Kumagai Japan's interests in Hongkong. Other parties in the eventual listing four years later were Mr Li Ka-shing with 16 per cent, through LKS Charity Fund; Mr Ho Tim, managing director of Hang Seng Bank and a senior executive at Dah Chong Hong, with seven per cent; and Mr Poon Kam-kai with seven per cent. The placing is being managed by Wardley Corporate Finance, Wardley James Capel (Far East) and Peregrine Brokerage. In a statement last night Mr Yu said: ''Notwithstanding the placing, the company intends to retain its present name, and the current operational support from, and close business relationship with, Kumagai Gumi Japan will continue.''