Thomas Chan Kui-yuen, a Sun Hung Kai executive director responsible for project planning and land acquisitions, was arrested by Hong Kong's Independent Commission Against Corruption (ICAC) in relation to allegations of bribery, the company said. It did not give more details of the alleged offence.

Sun Hung Kai is run by brothers and joint chairmen Thomas and Raymond Kwok. The Kwoks are Hong Kong's second-richest family, according to Forbes magazine, with a net worth of $18.3 billion as of March.

The company has set up a special committee to handle the ICAC investigation, the developer said in a statement late on Monday.

A spokesman for Sun Hung Kai said on Tuesday that it had no further details to add. The ICAC declined to comment on an individual case.

EXCEPTIONAL CASE

One analyst, who did not want to be identified given the sensitive nature of the allegations, said there had not been a similar case at a major Hong Kong developer since the analyst started covering the sector 15 years ago.

The Standard newspaper reported that Chan was particularly active in assembling the land at Ma Wan, where the company is marketing its multitower Park Island apartment project, and at The Vineyard, a luxury low-rise development in rural Yuen Long.

Another analyst told Reuters Chan was particularly active in buying farmland from villagers in Hong Kong's New Territories.

The Hong Kong Economic Journal stated that the allegations stem from a land deal in 2003, citing sources with knowledge of the matter. It did not elaborate.

Shares of Sun Hung Kai, which has a market value of around $39 billion, slipped 2.4 percent in afternoon trade on Tuesday, with the benchmark Hang Seng index .HSI down 0.5 percent.

Spreads on the company's 2022 bonds widened by 20 basis points on Tuesday to 220 basis points over U.S. Treasuries.

Both stock and bond analysts said the dips would likely prove short-lived. Some analysts said the company is very careful with its land acquisition strategy and willing to pay higher prices for plots that it can buy securely at arm's length.

"Sun Hung Kai has a very professional management team and proven track record so it shouldn't have an impact on the share price," said Alfred Lau, Hong Kong property analyst at Bocom International.

The company said the arrest "has not affected and will not affect" its normal business and operations.

CALL FOR DISCLOSURE

According to the Reuters database, Chan, 65, has worked at the company since 1973 and has been a director since 1987. Sun Hung Kai develops property in Hong Kong and mainland China and holds a portfolio of office space including Hong Kong's tallest building, the International Commerce Centre.

Though land in Hong Kong is ultimately leased from the government, developers often assemble projects in the New Territories by negotiating with villagers that hold the plots.

David Webb, a Hong Kong-based corporate-governance activist, called on the developer to be more forthcoming.

"If they know what the allegation is, they should say what it is," Webb said. "I can't recall any senior official of a Hong Kong developer being arrested."

Sun Hung Kai Properties reported in February an underlying profit of HK$11.8 billion ($1.52 billion) for the fiscal first half ended December 31, up 13 percent from a year earlier, slightly exceeding expectations.

The number of property deals in Hong Kong fell 33.1 percent in 2011 from the previous year as the government imposed a series of measures to stamp out property speculation and cool the city's housing market.

Though analysts could not recall a bribery arrest with a major Hong Kong developer, property-project approvals were thrown into chaos by a bribery scandal not too long ago in Macau, an hour's ferry ride away.

That territory's highest court in 2008 jailed Ao Man-long, the former secretary for transport and public works, for taking millions of dollars in kickbacks to speed up construction projects.

(Additional reporting by Umesh Desai; Editing by Muralikumar Anantharaman)

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