"In an environment of uncertainty you want to go to quality and quality is Hong Kong and Singapore corporates, which will continue to do well," said Bill Belchere, managing director, fixed-income strategy at U.S. investment bank Merrill Lynch in Singapore.

Spreads on Hong Kong corporate U.S. dollar, or Yankee, bonds have tightened by about 20 basis points (bps) over U.S. Treasuries in the past three months.

In comparison, Korean U.S. dollar bonds have tightened by about 15 bps while Malaysian issues, which were hurt by the country's recent credit rating downgrade by Standard & Poor's, are 30 bps wider than three months ago.

HUTCHISON FAVOURED

Bond markets have benefited from a decline in U.S. interest rates since the start of this year and an inflow of funds as investors have reduced their holdings in the volatile equity markets.

The Asian dollar bond market, however, is tiny. The amount of money raised last year via Yankee bonds in Asia ex-Japan totalled about $11.9 billion. That is a sum that could easily be raised in less than a week in the U.S. corporate bond market, analysts said.

More important only Hong Kong and Singapore issues have A rating, or investment grade status, and with slowing economic growth posing a threat to debt restructuring in other economies in the region, investors are likely to stick to top quality issues.

Demand for Hong Kong Land's 10-year bond issue, launched in New York on Wednesday, was so strong that the Singapore-listed company doubled the size of its first ever dollar bond to $600 million.

About sixty percent of demand was from institutions in Asia, predominantly Hong Kong, 25 percent was from Europe and the rest came from the United States, sources close to the deal said.

While new supply would normally tend to put pressure on existing comparable bonds, Hong Kong Land has had the reverse effect, pushing Hong Kong corporate Yankee bonds further into the spotlight.

It has helped revive ports-to-telecom conglomerate Hutchison Whampoa's <0013.HK> two issues, which had bucked the market by widening in recent months on concern about risk in the telecom sector.

Spreads on Hutchison's 6.95 percent 07 issue have tightened by up to 15 bps to about 187 bps over Treasuries over the past week although they are 11 bps wider than three months ago.

Analysts say it is now one of the most attractive high-grade issues and offers better value than Hong Kong Land.

"Hutchison has a good business even with its telecom exposure," said Teck Hoon Low, a bond specialist at ABN Amro in Singapore. "Unlike European telecom companies it has increased the value of its assets by trading one asset for another so it has not substantially increased its liabilities."

SPECULATION RIFE

Analysts say the success of the Hong Kong Land issue together with the fall in share prices and expected further cuts in U.S. interest rates may encourage more Hong Kong and Singapore companies to tap the Yankee bond market.

Market speculation is rife about who they are likely to be.

Names being bandied about include Hong Kong property-based conglomerates Swire Properties <0019.HK> and Wharf Holdings <0004.HK>, which both have issues that will mature in 2004, and telecom-based conglomerate Citic Pacific <0267.HK> which has long talked about tapping the market.

Speculation in Singapore centres on Singapore Telecommunications <TELE.SI>, which requires funds to help finance its acquisition of Australia's Cable & Wireless Optus <CWO.AX>, and Singapore Power Ltd, which recently tapped the Singapore dollar bond market with a 12-year S$300 million ($165.7 million) issue.

"There is not a lot of expansion in the region so many good companies don't need to raise a lot of money," Belchere said. "But those with longer-term plans may decide to get funding while rates are low."