The Government has fully recouped the HK$118 billion it spent on its controversial stock market intervention during the Asian financial crisis, according to Financial Secretary Donald Tsang Yam-kuen. Mr Tsang said the Government, through the Exchange Fund, had now received HK$119 billion from sales of its Tracker Fund, established in 1999 to offload the shares it purchased in 1998. The Government spent HK$118 billion in August 1998 to try to beat off speculators in the foreign exchange and share markets. The Government still has more than HK$100 billion left in its portfolio to sell. Although it bought HK$118 billion worth of shares, the value of that portfolio has risen substantially as the market has recovered. Mr Tsang said the Government would retain nearly half its remaining stock, worth HK$50 billion, as long-term investments in the Exchange Fund. The remaining HK$60 billion shares would be sold through quarterly sales of the Tracker Fund. That equates to about HK$12 billion every quarter. If no other selling method is used, the Government will sell the last tranche of its portfolio in the third quarter of next year. However, Yang Ti-liang, chairman of Exchange Fund Investment (EFI) - the custodian of the government portfolio in charge of sales - said the sale could be earlier than then. The EFI will review the market and might use methods other than the Tracker Fund to sell the shares. However, Mr Yang said alternative methods would not be used in the present volatile stock market. The EFI had considered using methods such as a private placement and convertible bonds to dispose of billions of dollars' worth of shares. But it would not dispose of the shares by these methods now as a huge disposal could further upset the stock market. The Hang Seng Index has dropped 15 per cent in the first quarter of this year. 'We will review the stock market situation before we decide to use alternative means other than the Tracker Fund to dispose of the government shares,' Mr Yang said. 'We want to sell the shares but we don't want to upset the stock market.' Mr Tsang yesterday met with reporters and EFI board members, including Hong Kong Monetary Authority chief executive Joseph Yam Chi-kwong and Mandatory Provident Fund Schemes Authority managing director Rafael Hui Si-yan, who was secretary for financial services in 1998. Mr Tsang said the three were responsible for the incursion and he said that deciding to step into the local stock market 'was a difficult time for us'. The market intervention was criticised by many market participants as it went against the Government's non-intervention policy. Mr Yam said the HK$118 billion cost of intervention was much higher than expected and raised fears the Exchange Fund would suffer a loss in the event the value of the shares dropped. It also raised concerns that the shares held by the Government limited the number of shares freely traded in the market. These worries were now settled, Mr Tsang said, as the intervention was proven to have caused no harm to the Exchange Fund, which now looks set to book a HK$110 billion paper profit. 'And I think after 32 months, we still believe it was the right decision,' he said. 'It was a painful one. But with the help of Mr Yang, I think at least we have earned back our reputation.' Mr Tsang said Hong Kong had improved a lot after the Asian crisis. 'The whole episode has helped Hong Kong strengthen its resolve, reform our monetary system and make use of this opportunity to introduce a very interesting instrument called the Tracker Fund into the market,' Mr Tsang said. 'So far, the Tracker Fund has been very popular and regarded as a reliable investment instrument. 'So it has been a happy day.' Some brokers said some big players regularly sold the market short then bought back the Tracker Fund to cover their positions to earn money from the arbitration. They said these activities made the market more volatile. Mr Tsang said it was no surprise to see arbitration taking place in the market. However, he believed such activities would not have a big negative impact.