Tracker Fund shows US investors the door

Finance | Avery Chen 30 Jul 2021

State Street Global Advisors Asia, the manager of the Tracker Fund of Hong Kong (2800), the city's most popular exchange-traded fund, amended its prospectus yesterday to warn that US citizens and companies will not be able to trade any units after June 3 next year.

That complies with an executive order from former US President Donald Trump last November that banned American investments in Chinese companies linked with Beijing's military. SSGA is the Asian unit of Boston-based State Street Corporation.

The units in TraHK will not be offered or sold in the United States or to US persons outside the country, the new prospectus said. "US person" means any US citizen, lawful permanent resident, entity organized under US laws or any person in the US, it said.

The TraHK tracks the Hang Seng Index, which includes US-blacklisted companies like telecom giants China Mobile (0941) and China Unicom (0762) as well as major oil producer CNOOC (0083).

SSGA has said the TraHK is not appropriate for US persons to invest in.

"The accompanying unit-holder notice reminds investors that if they are US persons, US law may prevent them from disposing of or otherwise dealing in their units after June 3, 2022, although they may still receive dividends," a spokesman of SSGA said.

The spokesman added the change will not affect TraHK's operation and the interests of unitholders, as only a very small percentage of the fund is directly held by US persons.

Local media reported in May that the Hong Kong Monetary Authority has appointed independent third parties to audit TraHK and is considering whether to change the fund manager.

SSGA said in January that it would not make any new investment in US-banned companies. But two days later, it made a U-turn and said TraHK would resume investments in those firms. The HKMA said in May that if the supervisory committee of the TraHK decides to change the fund manager, it will carefully evaluate different candidates.



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