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

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The Hong Kong government has done the right thing, taking a strong stance to safeguard the interests of investors in Hong Kong, says the chairman of industry body Hong Kong Institute of Securities Dealers. Photo: AFP

Published: 7:26pm, 13 Jan 2021Updated: 11:27am, 14 Jan 2021

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.

Its U-turn comes two days after the manager declared that it would not be able to buy any more stocks of sanctioned companies. This included the shares of China Mobile and China Unicom, both Hang Seng Index components. The telecoms giants are covered by US sanctions effective from Monday. Restrictions against CNOOC, another blue-chip stock, will become effective from next month.

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.

Wednesday’s development comes on the heels of a flip-flop by the New York Stock Exchange, which made two U-turns in as many days over whether to allow trading in the American depository shares (ADSs) of three of the US-sanctioned companies on its board.

“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.”