The Tracker Fund of Hong Kong said it would continue investing in companies listed by Washington as having links to China’s military, backtracking on an earlier decision this week . ©AFP/File ROBYN BECK

Hong Kong (AFP) – Hong Kong’s original stock market tracker fund said Wednesday it would continue investing in companies listed by Washington as having links to China’s military, backtracking on a decision it made this week. 

The announcement highlights how tension between the world’s two biggest economies is causing headache for international firms in Hong Kong, which has long served as China’s gateway to global markets.

Outgoing US President Donald Trump issued an order in November banning Americans from investing in Chinese firms deemed to be supplying or supporting the country’s military.

On Monday the Tracker Fund of Hong Kong (TraHK) — which has some US$14 billion in assets — said it would comply with the order and recommend Americans should longer invest in the fund.

But on Wednesday the fund u-turned.

“TraHK will resume investments in sanctioned entities that are constituent companies of the Hang Seng Index with effect from 14 January 2021,” it said in a statement to Hong Kong’s stock exchange. 

They would, however, advise Americans that it wasn’t “appropriate” to invest.

TraHK was set up by Hong Kong’s government following the 1998 Asian financial crash and is the city’s biggest exchange-traded fund.

It is run by the Asian arm of State Street Global Advisors, a massive US asset management firm.

Hong Kong-based firms are finding themselves acutely vulnerable to the crossfire of spiralling tensions and competing restrictions.

Last year the US imposed sanctions on multiple Chinese and Hong Kong officials over Beijing’s crackdown on democracy supporters in the city.

The restrictions bar financial institutions from doing any transactions with the sanctioned individuals. 

At the same time, Beijing has imposed a sweeping national security law on Hong Kong which — among its many provisions — outlaws firms from complying with foreign sanctions regimes.

The dichotomy has left international businesses fearful of being punished by both sides.

Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.