Transport market leaders FirstGroup and Stagecoach both expressed confidence yesterday that they could win a key Hong Kong bus franchise and use it as a launch pad into China.

FirstGroup has teamed up with one of the largest conglomerates in Hong Kong, New World Development Company, to bid for the China Motor Bus franchise which has been put out to tender by Hong Kong government.

The UK groups appear to be the only overseas bidders alongside several Hong Kong consortia.

FirstGroup will have a 26% stake in the venture and chief executive Moir Lockhead said yesterday a successful bid could bring an order for 600 buses, with Falkirk-based Alexanders in pole position to build them.

Late yesterday Stagecoach, which has experience in Hong Kong, threw its hat into the ring with the announcement that it has set up a 50-50 joint venture with the existing operator, China Motor Bus.

Finance director Keith Cochrane said: ''We believe our bid is potentially very attractive because it combines the benefit of a smooth transition from the existing operator with the benefit of Stagecoach managing the business on a day-to-day basis.''

Stagecoach said the partners will invest in 430 buses, with 200 in place by the end of next year.

The Hong Kong government invited tenders after refusing to renew the China Motor Bus franchise, after negotiations with the Hong Kong company broke down. But it only announced the decision a month ago, with a takeover date of September 1.

Other known bidders are Hong Kong companies Kowloon Motor Bus, Citibus and Citic Pacific.

New World First, the FirstGroup/New World joint venture company, said it would invest #160m in the ageing China Motor Bus fleet if awarded the tender.

New World is a quoted conglomerate with businesses in property development and investment, hotels, infrastructure, services and telecoms, and it is also the largest Hong Kong investor in China with more than #2000m invested in some 120 projects in 15 major Chinese cities and provinces.

It made a #425m profit last year on turnover of #1590m and assets of over #8600m.

FirstGroup, the UK's leading passenger operator which only a week ago announced it was paying #105m for the remaining 75% of the Great Western rail company, said it would fund the venture through available internal resources.

Moir Lockhead said: ''This and future potential opportunities in China offer the ideal platform for FirstGroup to develop further its international strategy.''

He added: ''It is extremely important for us as it gets us into a completely new market.

''We would be looking at a smooth transition, upgrading the quality of the fleet, and a massive investment programme.''

But at Stagecoach, Keith Cochrane observed that handing over the China Motor Bus fleet to a new company would involve the Government taking powers of compulsory acquisition, which it might prefer not to do if possible.

Cochrane said: ''When the last big tender came out in 1992 we were beaten by Citibus, and we then set up a small operation in Hong Kong which we ran for about two years with 11 buses.

''We believed that if we were resident there was perhaps more chance in the future.

''We have local people that understand the market and those local relationships have helped us put the bid together.''