Property developer Cheung Kong (Holdings) might be a beneficiary of the corruption cloud hanging over senior executives of rival developer Sun Hung Kai Properties.
Property funds mandated to invest only in property stocks may be switching their Sun Hung Kai Properties holdings into Cheung Kong shares to avoid potential litigation in the wake of the arrest and questioning of the two executives by Hong Kong's anti-graft body, say analysts.
Shares in Sun Hung Kai Properties plunged 13 per cent on March 30, one day after the arrests of its joint chairmen - Thomas Kwok Ping-kwong and Raymond Kwok Ping-luen - were announced by the Independent Commission Against Corruption.
The two were released on bail after being questioned, and have not yet been charged with any offence.
However, not all fund movements could be ascribed to the corruption probe into Sun Hung Kai Properties, now under way. Analysts said Cheung Kong, which is expected to launch 5,125 units this year, also offered stronger fundamentals than other developers and was therefore more attractive to investors.
Investment bank Morgan Stanley said in its latest research report that Cheung Kong had the most flats available in its sales pipeline. By comparison Sun Hung Kai Properties would launch 2,294 units this year with Sino Land selling 3,628 units and Henderson Land 2,231.
'Litigation risks will force property funds to reduce or cut their holdings in Sun Hung Kai Properties and shift to other comparable property stocks,' said Phillip Capital Management fund manager Li Kwok-suen.