July 16 (Bloomberg) -- Sun Hung Kai Properties Ltd. declined in Hong Kong trading after its billionaire co-chairmen were charged with bribery by the city’s anti-graft agency last week.
The shares, which were halted on July 13, fell as much as 1.4 percent and closed down 1 percent at HK$94.50. Barclays Plc lowered the price target for Hong Kong’s biggest developer by 5 percent to HK$87.50 while maintaining an underweight rating on the shares, analysts, led by Andrew Lawrence, wrote in a report today.
Thomas and Raymond Kwok and two other men conspired to provide Rafael Hui, the city’s former No. 2 official, with payments and loans totaling HK$34 million ($4.4 million) for unspecified favors involving Hui’s role as the government’s then chief secretary, according to court documents. Sun Hung Kai promoted two executives to deputy managing directors to assist the co-chairmen, who will retain their current roles at the company, the developer said in a separate statement.
“The company’s two key decision makers will likely have limited time for company business,” wrote the analysts, adding that the charges against the Kwok brothers “allows the court to potentially award compensation to the government for the advantages gained from any proven bribery.”
Sun Hung Kai’s stock has fallen 15 percent since the brothers were arrested March 29, compared with a 4 percent decline in the Hang Seng Property Index.
Hong Kong’s highest profile graft case adds to pressure on the city’s Chief Executive Leung Chun-ying, who took office July 1, to address public concern over the conduct of government officials. His development secretary resigned last week after the Apple Daily reported he had misused government housing allowances. Leung himself has been accused of misleading the public about illegal structures built at his home.
Magistrate David Dufton on July 13 allowed bail for the Kwoks and Hui.
Moody’s Investors Service said on the same day it was maintaining a negative outlook on Sun Hung Kai because “the latest development is credit negative” for the developer “as its reputation is now further at risk.”
Sun Hung Kai has been run by Thomas and Raymond Kwok since the ouster as chairman in 2008 of their elder brother Walter. Walter is still a non-executive director.
Thomas and Raymond Kwok will continue to discharge their duties with the assistance of new deputy managing directors Mike Wong and Victor Lui, Sun Hung Kai said in the stock exchange filing on July 13. Wong and Lui are both executive directors at present. In addition, Adam Kwok, a son of Thomas, and Edward Kwok, a son of Raymond, were named as alternative directors to their fathers, the developer said.
The appointments “fail to sufficiently address the concerns of minority shareholders and misses the opportunity to address corporate governance issues at the board level,” wrote the Barclays analysts.
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