THE race by Hong Kong blue-chip property companies to raise money through convertible bond issues is expected to soon grind to a halt. First, analysts say there are very few, if any, major Hong Kong property counters likely to issue convertible bonds that have not already done so. And second, they are questioning how receptive investors will be to any more big issues by Hong Kong property companies after having flooded the Euro convertible bond market last year. Of the US$3.87 billion worth of convertible bond issues that came out of Hong Kong in 1993, roughly 90 per cent were by property-related counters. Hongkong Land said late last week it would increase the size of its US$300 million Euro convertible bond issue to US$410 million, due to strong investor demand. However, analysts say this is more due to the strength of the Hongkong Land name than the fact that it is a property counter. As a whole, investment bankers are saying that after the flurry of convertible bond issues by Hong Kong property groups last year, investor demand for such issues is believed to be dwindling. But, given the volatility of the Asian stock markets over the past fortnight, we could see interest in convertible dragon bonds reinforced. A convertible bond usually has lower volatility compared with shares, providing a fixed rate of return with an additional option to convert into shares upon maturity. Given the current low interest rates in Europe, Hong Kong property counters have been finding Euro convertible bonds a cheap and convenient way to raise funds for future projects, generate additional working capital and repay costly bank borrowings. Wharf (Holdings) got the ball rolling in June last year when directors John Hung and Edward Cheng went to Europe to promote Wharf's pioneering US$350 million seven-year issue, lead managed by Morgan Stanley. Other major issues quickly came from Guangdong Investment (US$102 million), Guangzhou Investment (US$105 million), Amoy Properties (US$250 million), Sino Land (US$175 million), Henderson China (US$460 million) and Hong Kong Resort (US$100 million). Among the big property firms to jump on the bandwagon in the latter part of the year were New World Development (US$345 million), Kumagai Gumi Hong Kong (US$150 million), Lai Sun Development (US$150 million) and Lippo (US$100 million). As analysts went off for their Christmas breaks, many thought the charge to launch new issues was coming to an end. However, the new year appears to have begun as last year left off. Two of the four new convertible bond issues announced last week were by property-related companies. Last Monday, Hongkong Land announced its seven-year US$300 million issue, planned partly to satisfy some of its commitments to its loss-making 25.23 per cent owned subsidiary Trafalgar House. And on Tuesday, Paul Y-ITC Construction announced a US$100 million seven-year issue lead managed by Peregrine Capital to generate additional working capital. The other two companies deciding to tap the international debt markets last week were Goldlion - with a five-year US$50 million issue lead managed by CS First Boston, and Peregrine Investments - with a seven-year US$175 million issue, co-managed by Morgan Stanley International and Peregrine Capital. There are a handful of major property firms which have resisted the temptation of issuing convertible bonds. Analysts say Sun Hung Kai Properties, for example, is unlikely to want to further dilute its stock some time down the road to raise money now. Tatsuro Higashi, chief manager for syndication and news issues at Nomura International (Hong Kong), expects to see a broader range of companies launching convertible bond issues. Mr Higashi said investors wanted a wider range of company types in their portfolios. He also expected to see a wider range of currencies being used. Nearly all the issues launched in 1993 by Hong Kong companies were Euro dollar convertibles. There has recently been a small number of Swiss franc and deutschemark-denominated issues and Mr Higashi expects this diversification of currency denominations to expand. He also expects more global dollar and dragon dollar convertible bonds issued in 1994. Hong Kong was by far the largest Asian issuer of convertible bonds outside Japan in 1993, followed by Thailand and India. Mark Hantho, Morgan Stanley Asia's vice-president for equity capital markets, expected Thailand to overtake Hong Kong as the most prolific source of new issues in Asia this year. New convertible bond issues are expected to come primarily from its property and financial sectors. However, the banking industry and regulators have been debating the possibility of an across-the-board rule aimed at placing limitations on Euro convertible debenture features. The equity market in Thailand surged in 1993, vaulting more than 87 per cent for the year, including 72 per cent over the last quarter. These high returns have attracted strong foreign interest in Thai equities. Consequently, convertible bond issues have mushroomed to cater for this demand. Chris Edwards, Salomon Brothers Asia Pacific derivatives researcher, said: ''As a result of the strengthening of the equity market, many of the convertible bond issues are now well in the money and they now trade effectively as equity.'' The potential for eventual conversion into shares tended to be high in Thailand, he said. Also, most of the bonds that were well in the money traded at substantial discounts to their underlying equity value. Similar investment opportunities can be found in Hong Kong. Mr Edwards pointed in particular to Sino Land, Amoy Properties, Guangdong Investment and Guangzhou Investment, which have been trading at discounts to their underlying equity values. Mr Hantho expects companies from Malaysia and perhaps Taiwan to emerge as significant players in the convertible bond market this year. Mr Higashi tipped the Philippines and Pakistan as significant newcomers to the market in 1994. There could also be a number of China B-share convertible bond issues this year, analysts predicted. Shanghai Textile Machinery was the first mainland company to make a convertible bond issue last year. Although its B-share issue was very small, it was strongly received by investors.