Tracker Fund completes 25 years as Hong Kong lays foundation for thriving ETF market

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The Tracker Fund has mirrored the Hang Seng Index’s returns since inception, giving investors an indirect bet on a basket of benchmark stocks

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Peggy SitoandMia Castagnone

Published: 5:45pm, 12 Nov 2024Updated: 6:28pm, 12 Nov 2024

The Tracker Fund, Hong Kong’s biggest and most popular exchange-traded fund (ETF) with HK$149.9 billion (US$19.3 billion) of assets, celebrated its 25th anniversary this week. While assets have multiplied, so has market volatility and risks.

Established on November 11, 1999, the Tracker Fund, also known as TraHK, was set up by the Hong Kong Monetary Authority (HKMA) to absorb stocks accumulated by the government during a two-week market intervention when it spent HK$118 billion to prop up stock prices during the 1998 Asian financial crisis.

The ETF has since become an inspiration for growth as ETFs mushroomed, while a Connect link was created with onshore markets. Hong Kong is striving to become Asia’s leading ETF hub, with latest efforts including strengthening ties with Middle East investors.

“The creation of the fund was for the orderly and non-disruptive disposal of a substantial portfolio of shares acquired by the government in a decisive market operation in 1998 to uphold market stability and integrity,” Financial Secretary Paul Chan Mo-po said at the celebration ceremony on Tuesday.

Paul Chan speaks at the 2024 Hong Kong Investment Promotion Conference – Shanghai Forum on November 5. Photo: Handout

“It has encouraged long-term investment via unit trusts, enhanced public’s understanding of ETFs and fostered greater public participation,” Chan added. “It laid the foundation for the thriving ETF sector we see today.”

The Tracker Fund’s objective is to provide results that closely mirror the Hang Seng Index, allowing investors to indirectly own a basket of benchmark stocks and their corresponding weightage. Hong Kong’s government raised HK$33.3 billion when it floated the ETF, then the biggest IPO in Asia excluding Japan.