Tracker Fund Stops Investing In US-sanctioned Firms

The Tracker Fund of Hong Kong said on Monday that following a US ban on investments in companies deemed to be linked to China’s military, it will no longer make new investments in firms covered by the ban.

It added that Americans should no longer invest in the fund.

The exchange-traded fund, created by the Hong Kong government but managed by a US firm, provides investment results closely corresponding to the performance of the benchmark Hang Seng Index.

In a statement, the Tracker Fund said it won't make any new investments in an entity sanctioned by the US starting from Monday, and reminded investors that the return of its fund is likely to have a bigger deviation from that of the Hang Seng Index.

The Trump administration had earlier signed an executive order banning American investors from buying shares in companies deemed to have links with the Chinese military.

Mainland telecom giants China Telecom, China Mobile and China Unicom have been named and are expected to be delisted from the New York Stock Exchange.

"As a result of the Executive Order, TraHK is no longer appropriate for US Persons (as defined in the Executive Order) to invest. You should consider whether this is an appropriate investment for you," the fund said in a public statement.

A director of asset management at Ample Capital, Alex Wong, said although he thinks the move is surprising, the impact to investors would be limited.

"We are not talking about a huge portion of the index being affected. And also the tracking error incurred may not be too much...telecom sector actually have been under-performing in the world so people would not mind too much I think," he told RTHK's Candice Wong.

It comes after Goldman Sachs, Morgan Stanley and JP Morgan announced they were delisting about 500 structured products linked to stocks because of the US sanction.