KUMAGAI Gumi (Hong Kong) is planning to make a US$100 million convertible Eurobond offering. The latest in the long list of Hong Kong corporations to tap the international money market for a cash infusion, Kumagai Gumi's issue comes toward the lower end of recent calls on the market. One source said that the offering would be arranged by C. S. First Boston and the coupon was expected to range from four to six per cent with a 25 per cent conversion premium. Although the final terms of the offering have yet to be finalised, they are expected to be in line with similar offerings made recently. The proceeds of the exercise will be used to reduce the company's level of bank borrowing and assist with the existing work-book it is running in Hong Kong and China. Kumagai Gumi is seen as cash-rich by analysts, particularly after the sale of the Ambassador Hotel in Tsim Sha Tsui to the Lippo Group for $1.29 billion in September. Most believe it is purely seeking to lock into the attractively low yields the Euromarkets currently offer. By recent standards, the size of the fund raising is relatively small. Last week Henderson Land announced a second offering of US$300 million, which followed hot on the heels of the US$460 million it announced only two weeks before that. Given Kumagai Gumi's involvement in a series of infrastructure projects in China, the offering has the flavour of a red-chip play on the hot topic of the moment, infrastructure. These projects include the Yangpu power station in Hainan Island, which forms part of a wider development plan for the Yangpu port; a $1 billion airport extension project in Lanzhou city in the north-western Gansu province; and a series of residential and commercial developments it is running in Guangdong province. Given the current predilection for so-called concept investing, international investors who believe China's next phase of development will be driven by large infrastructure projects should find the offering attractive. The rage for Euro-convertibles as the preferred method of fund raising is a direct consequence of the extremely low interest rates being offered by other low-risk, fixed interest securities, such as US treasury bonds. Given the option of investing in dreary treasuries or low-yielding corporates, the alternative of a high quality bond which also provides a play on Asia's booming equity market provides the explanation for the massive liquidity coming into the market. That market is underpinned by a growing number of Asian investors who are entering the market for the first time as understanding of the instruments widens. Also, as the perception that Hong Kong's blue chips have come of age hardens, institutional investors who once steered clear of Asian commercial paper due to a lack of coverage by the rating agencies are now beginning seriously to enter the market.