Tracker fund halts new investment in Chinese companies sanctioned by US

Business | 11 Jan 2021 3:14 pm

Hong Kong's stock market tracker, TraHK,which  was used an exit strategy for the government to dispose of stocks purchased in Auugust 1998, said  would not make new investments in companies listed by Washington as having links to China's military as it also recommended Americans no longer invest in the fund.

Outgoing US President Donald Trump issued an order in November banning Americans from investing in Chinese companies deemed to be supplying or supporting China's military.

The Tracker Fund of Hong Kong (TraHK) -- which has some US$14 billion in assets -- said it was complying with that order.

"In light of the Executive Order, TraHK will not make any new investments in a sanctioned entity with effect from 11 January 2021," the company wrote in a statement to the stock exchange.

"TraHK is no longer appropriate for US persons to invest. You should consider whether this is an appropriate investment for you," it added.

TraHK was used an exit strategy for the government to dispose of stocks purchased in the summer of 1998 through the launch of the first Exchange-Traded Fund (ETF) in Asia outside of Japan.

On August 28, 1998, the then Financial Secretary, Donald Tsang, committed HK$118 billion from the Exchange Fund, over 10 trading days, to buy 33 Hang Seng Index constituents.

The TraHK initial public offering, which raised HK$33.3 billion, was the largest in the region (excluding Japan). By April 2001 the government recouped more than the HK$118 billion used by the Exchange Fund in the stock market operation.

Overall, the government sold HK$140 billion worth of shares into Tracker, received HK$24 billion from dividends, and also retained HK$50 billion in the Exchange Fund's long term equity portfolio.

TraHK  is run by the Asian arm of State Street Global Advisors.-Agencies/The Standard. Photo: RTHK



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