Hong Kong To Sell $8bn Tracker Stocks In 3rd Quarter

by Mary Swire, Tax-News.com, Hong Kong

17 June 2002

Saying that market sentiment had improved, Hong Kong's Exchange Fund Investment director Chan Kam-lam said that the government would sell HK$8 bn of Tracker Fund stock in the third quarter of the year: "The economic situation and market sentiment have both recovered to some extent, and so we think it is the right time to sell more of the Government portfolio," he said.

The announcement undermined the Hang Seng Index, coming after a week of negative news from the US, and it closed down 2.9% on the week, ending below 11,000 for the first time since mid April.

After the third quarter sales, which will help the Government's deficit projections, Chan Kam-lam said the government would still have about HK$19 billion worth of shares for sale and that it would be difficult to dispose of them entirely this year.

Quarterly sales of HK$12 bn had been the norm after the Tracker Fund was launched in November 1999, but last year the Government began curtailing supply because of tough market conditions. In the final quarter last year it sold only HK$1 billion, followed by HK$3 billion in the first quarter this year and HK$6 billion in the current quarter, which were quickly snapped up.

In 1998, the Government spent $118 billion to buy Hang Seng Index stocks to support the market during the Asian economic crisis. It was much criticised at the time, but the operation was a big success, and the Government has since been selling the shares via the Tracker Fund, raising more than $150 billion so far.

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