The prophets of doom who predicted that the Hong Kong government's unloading of its stock market portfolio would be a disaster have been proven wrong. Its Tracker Fund of Hong Kong was massively oversubscribed at launch. But behind the offering's success lies a tale of disputes over commissions and rebates, anxiety among some professionals that that fund would add to market volatility and concern that the government is deviating from a laissez-faire policy that has served the territory so well.
The story goes back to August 1998 when the Hong Kong government broke with tradition and spent US$15 billion (HK$117 billion) from official reserves on propping up the local share market. A year later these shares were worth $26 billion but the government faced the problem of liquidating all but 5% of this unwanted equity portfolio without creating a fresh stock market crisis. Its solution was to create a free-standing...
