The Emergence of Mr Fung King Hey
European and American investment houses took special note of the fact that it appeared obvious that the Government of Hongkong was intent on bringing sanity to the investment climate of the territory.
Bandits were banished, it was presumed.
To this end, the US brokerage house of Merrill Lynch, Pierce, Fenner and Smith Incorporated came to town with pockets, full of money.
It sent to Hongkong some of its most-senior executives in order to determine just how this giant brokerage house could make some money from the booming equity markets of the territory.
The senior executives that they sent to Hongkong were:
1. Mr Donald C. Roth;
2. Mr Robert W. Williamson;
3. Mr F. Gregory Fitz-Gerald; and,
4. Mr Nigel S. MacEwan.
By that time, Merrill Lynch, Pierce, Fenner and Smith Incorporated had established Merrill Lynch and Company in Hongkong.
The French bank, Compagnie Financiers de Paris Et Des Pays-Bas (PARIBAS) was way ahead of Merrill Lynch, having secured for itself a large slice of the financial empire, controlled by another Chinese genius of this time: Mr Fung King Hey.
Mr Fung King Hey started out, simply as a stockbroker, and, when he obtained a $HK1-million order to purchase shares on Far East Exchange, he was quick to show me the cheque since, to this very retiring man, it represented the trust that had been shown by one of his customers.
At that time, Mr Fung King Hey had an office at Hongkong Chinese Bank Building in Central, Hongkong.
Between 1969 and 1980, this retiring individual became a multi-billionaire.
His innate ability did not go unnoticed.
Mr Fung King Hey’s partners in business included Messrs Lee Shau Kee and Kwok Tak Seng.
This triumvirate controlled the Sun Hung Kai Group of Companies, initially.
After a few years, however, the 3 businessmen went their own ways:
1. Mr Fung King Hey headed the securities group of Sun Hung Kai Securities Ltd;
2. Mr Lee Shau Kee went on to earn tens of billions of dollars by forming Henderson Land Development Company Ltd; and,
3. Mr Kwok Tak Seng formed Sun Hung Kai Properties Ltd, Hongkong’s largest property conglomerate, today.
While all of these 3 outstanding personalities proved their mettle, it was Mr Fung King Hey who captured the spirit of the times in Hongkong.
When Merrill Lynch first approached Mr Fung King Hey with a view to trying to obtain part of his operations, the executives of this giant, US stockbrokerage house had little idea what was about to happen.
In May 1980, Merrill Lynch acquired 15 percent of the Issued and Fully Paid-Up Share Capital of Mr Fung King Hey’s bank, known as Sun Hung Kai Bank Ltd.
At that time, PARIBAS owned 30 percent of the Issued and Fully Paid-Up Share Capital of this bank.
At the same time, Merrill Lynch negotiated to obtain a 25-percent stake in Sun Hung Kai Securities Ltd, with PARIBAS, taking 10 percent of the Issued and Fully Paid-Up Share Capital of what was, then, the largest Hongkong, stockbrokerage company.
Merrill Lynch’s concept for Sun Hung Kai Securities was that it would take over the securities side of the business, while Sun Hung Kai Securities would concentrate on commodities trading.
When visiting the office of Merrill Lynch in Hongkong and talking to some of the American brokers, I was told that it was Mr William R. Arthur, the Chairman of Merrill Lynch, Pierce, Fenner and Smith in New York, who ruled the international stock-market ‘waves’ not some 90-pound Chinaman, sitting in some piss-pot little office under the shadow of the Red Dragon (of China).
These gentlemen were to learn differently in a very short space of time.
The lesson that they, and others at Merrill Lynch learned, proved to be a terrible embarrassment to them.
What Merrill Lynch did not know at the time that their senior executives first approached Mr Fung King Hey in earnest was that this 90-pound Chinaman had cleared his decks for fast action, having ditched CLI International Incorporated and Bear Stearns Incorporated, these 2 companies, having been former partners.
Also, that which Merrill Lynch did not realise, at the time, was that this 90-pound Chinaman was very ambitious, extremely aggressive, and was an opportunist of the first order.
Mr Fung King Hey described the situation to me as he saw it at the time, thusly:
‘Raymonde, I (meaning Sun Hung Kai Securities) am a large fish in a very small pond (Hongkong). Merrill Lynch, on the other hand, is a medium-sized fish in the largest securities ocean of all (meaning New York).’
This minnow, swimming in the Hongkong securities’ pond, was about to try to swallow the whale that was Merrill Lynch, Pierce, Fenner and Smith Incorporated, which was supposed to rule the roost in New York, known as The Big Apple.
One of the first things that Mr Fung King Hey negotiated from Merrill Lynch was 4 percent of its Issued and Fully Paid-Up Share Capital.
He, then, negotiated to secure for himself, 10.30 percent of Merrill Lynch’s Convertible, Subordinated Debentures, convertible into the Common Stock of Merrill Lynch, Pierce, Fenner and Smith Incorporated.
Before it became apparent to the senior executives of Merrill Lynch, they were staring down the guns, potentially, of the largest single shareholder of their company on conversion of those Convertible, Subordinated Debentures, now in the very able hands of Mr Fung King Hey.
The minnow had swallowed the whale!
Now, the situation was that Mr Fung King Hey, if he chose so to do, could take control of the entire Merrill Lynch Empire, internationally.
Aside from being very embarrassed by the realisation that this formerly unknown Chinaman had outmanoeuvred the big guns of Merrill Lynch, there was the second embarrassment in that Hongkong had become the second-largest, money spinner for Merrill Lynch, second only to New York.
Heavy weather struck Sun Hung Kai Securities about 3 years later, however, and Mr Fung King Hey came to the rescue with his buckets of cash.
Meanwhile, the value of his shares and other equities in Merrill Lynch had more than doubled.
He was forced, eventually, to sell some of his equity interest in Merrill Lynch in order to prop up Sun Hung Kai Securities.
Mr William R. Arthur, Chairman of Merrill Lynch International, flew to Hongkong in 1983 in order to hold urgent discussions with Mr Francis Chan, Managing Director, Merrill Lynch and Company Incorporated, the Hongkong offshoot of the international division.
The result of those negotiations was that Merrill Lynch extricated itself from the clutches of Mr Fung King Hey and his group of companies in Hongkong and returned to New York.
As for Mr Fung King Hey, he, eventually, sold his equity interests in Merrill Lynch – much to the relief of the senior executives of Merrill Lynch in New York.
Thus ended the corporate marriage of a 90-pound Chinaman with one of the largest stockbrokerage house in the world: There was no conception and no progeny was forthcoming.