More than $5 billion was wiped off the market value of Sun Hung Kai Properties on Friday, after the billionaire owners of Asia's largest real estate developer were arrested on suspicion of corruption. Hong Kong's Independent Commission Against Corruption (ICAC) arrested Raymond and Thomas Kwok in the agency's biggest investigation since it was set up in 1974 to root out what was seen as widespread corruption in the government and police.
Rafael Hui, a former No 2 official in the government, was also arrested, according to media reports. Hui resigned as an independent director of insurer AIA Group late on Thursday. The arrests on Thursday come just days after Hong Kong elected Beijing-loyalist Leung Chun-ying as its next leader, pledging land for cheaper public housing, and as soaring property prices, the most expensive in the world, have stirred public discontent. Home prices almost doubled in the five years to end-2011, according to real estate broker Knight Frank.
"This is not good for the image of Hong Kong, which used to have a high reputation for integrity," said Joseph Wong, a former senior government official and colleague of Hui. "The impression is that government policies tend to favour the rich tycoons, particularly rich property developers. These sort of cases will only add to the suspicions."
The two Kwok brothers and Hui were released late on Thursday but were expected to return for more questioning, according to a source familiar with the matter. Local media reporters said the brothers were still inside a Deepwater Bay luxury compound on the south side of Hong Kong on Friday. The Kwoks are worth $18.3 billion, according to Forbes magazine, the second-biggest family fortune in Hong Kong after Asia's richest man, Li Ka-shing, founder of rival developer Cheung Kong (Holdings). Shares in Sun Hung Kai slumped more than 15 percent to 15-week lows when they resumed trading on Friday. The company owns some of the former British colony's largest properties, including its tallest building, the International Commerce Centre that houses Morgan Stanley and the Ritz Carlton.
"This is justice. They're among the biggest, richest men in Hong Kong. The power of the property sector is too strong, but the business-government connection is the same around the world," Terry So, an elderly chauffeur, told Reuters near the Sun Hung Kai Centre.
Sun Hung Kai said the Kwoks would continue with their duties as chairmen and managing directors, and normal business operations would not be affected. In the past two weeks, Sun Hung Kai has also disclosed that Thomas Chan Kui-yuen, in charge of project planning and land acquisitions, had been arrested for suspected bribery, and Chan Kai-ming, executive director of architectural and engineering services, had died, peacefully - meaning of the company's seven executive board members, three have been arrested, and one has died.
Hui, who, according to the Hong Kong Jockey Club website, has owned eight racehorses - two co-owned with Henry Tang, a loser in this month's leadership election - has been a long time adviser to Sun Hung Kai and has known the Kwoks since childhood. Details of what is behind the arrests remain unclear. The South China Morning Post reported that the ICAC was looking into suspected debts of more than HK$100 million ($12.9 million) linked to Hui, and a related, unsecured loan of HK$50 million.
Hui was Chief Secretary under Hong Kong's leader Donald Tsang in 2005-07, a post that would entitle him to government housing. But he "It's a sign they're trying to shift the power away from the tycoons," said Alaric Lau, a 45-year-old independent investor in equities and fixed income, who was walking near Hui's residence.
"These are three very prominent people in Hong Kong. The arrests are a sign of how they want to do things going forward ... there's no more favouritism that extends beyond the law it's a sign that the Chinese government is changing." The potential conflict of interest in a senior government official living - rent-free, according to media reports - in an upscale residence owned by an influential property family has not escaped public and media attention.
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