The Study Of "Tracker Fund Of Hong Kong

Asia economic crisis began in Thailand in the middle of 1997. Within a short period of time, the crisis spread over a number of Asian countries such as Indonesia, South Korea, Malaysia, Singapore and Hong Kong. The first part of this Article tries to investigate the cause and the consequences of the crisis.To counteract the crisis, Indonesia, South Korea and Thailand devalued their currencies; Singapore cut down the value of its assets and general price level, including wage, by 15%. Malaysia, on the other hand, implemented exchange control. However, none of these measures could be applicable to Hong Kong because Hong Kong Dollar has been pegged to US Dollar at a fixed rate of HKD7.80 to USD 1.00 and in accordance with the Basic Law, the Government of Hong Kong Special Administrative Region (HKSAR) was unable to cut down the wages of the civil servants. Taking into account of the characteristics of the Hong Kong economy, the international speculators used various tactics to impact the Hong Kong Dollar with a view to making huge profit. The second part of this Article tries to probe the various tactics that the international speculators used to thrust the Hong Kong currency and stock markets.The HKSAR government entered into the market to combat the international speculators on 14 August 1998, as a result of which, the HKSAR government acquired more than 2000 billion worth of locally listed securities. The main concern was how to release these securities into the market without creating great impacts to the market. Finally, the HKSAR government devised the Tracker Fund (TRHK) to do the job. Essentially, the TRHK is a mutual fund backed up by 33 Hong Kong listed securities in the similar combination as the Hang Seng Index, so that the performance of the TRHK will collaborate closely with the performance of the Hang Seng Index. Two internationally renowned financial institutes have been appointed to act as the manager and trustee to build up the confidence of the public. To attract the local residents to subscribe the fund, discounts would be given to local resident investors who continuously hold the units of TRHK for one year and two years respectively. The third part of this Article outlines various details of the TRHK.The fourth part of this Article gives an account of the performance of TRHK in the past year after its issuance. The fifth part of this Article is the conclusion in which an extract of one of the essays of Mr. Joseph Yam, the Chairman of the Hong KongMonetary Authority was quoted.