Hong Kong’s Tracker Fund to resume investing in companies sanctioned by US following U-turn by manager State Street Global
- Fund manager says it will remain consistent with its mission of providing investment results that closely correspond to the performance of the benchmark Hang Seng Index
- U-turn comes after Carrie Lam and Joseph Yam, former CEO of HKMA, vowed on Tuesday to replace State Street Global as Tracker Fund’s manager
The manager of Tracker Fund, Hong Kong’s largest exchange-traded fund (ETF), will resume investing in Chinese companies listed in the city that have been sanctioned by the Trump administration.
Buckling under pressure from government and financial officials, State Street Global Advisors Asia, a unit of the Boston-based company, said on Wednesday that it would resume investing in all constituent companies of the Hang Seng Index to remain consistent with its mission of providing investment results that closely correspond to the performance of the benchmark.
State Street Global’s about-turn underscores the quandary faced by compilers of stock benchmarks, banks and other financial services providers, as they grapple with how to comply with a vaguely worded executive order issued in the twilight of Donald Trump’s presidency.
“TraHK will resume investments in sanctioned entities that are constituent companies of the Hang Seng Index with effect from 14 January, 2021,” State Street said in a Hong Kong stock exchange filing. “We appreciate the significant public interest given the importance of TraHK to the Hong Kong markets and hope that the resumption confirms our commitment to track the Hang Seng Index for TraHK, as we have done for the past 21 years.”
It holds a 2.6 per cent stake in China Mobile and 0.27 per cent of China Unicom, as well as 1.14 per cent of CNOOC. All three companies are among 35 Chinese companies sanctioned by US President Donald Trump for alleged ties with the Chinese military.
Complying with the sanctions would have deprived investors of some of the most generous dividend payouts in Hong Kong. Non-compliance might subject the provider of the financial service or instrument to penalties under US regulations.
“This will encourage other US and international firms to follow suit when they struggle between following US regulations and fulfilling their duty to Hong Kong and Chinese investors,” he said, adding that State Street Global’s U-turn would provide a boost to the Hong Kong market.
HKMA, which has the power to replace State Street Global as Tracker Fund’s manager, said it would keep a close watch over the matter. The manager’s statements over the past couple of days had created “unnecessary market uncertainties. The HKMA has since followed up on the matter in close contact and communication with the Tracker Fund Supervisory Committee and State Street”, a spokesman said.