Investing reserves receives support
The Government's decision to invest between 10 and 15 per cent of its $659.5 billion reserves in the stock market for up to two years has received guarded support from industry players.
Financial Secretary Donald Tsang Yam-kuen said yesterday the Exchange Fund would hold on to the stocks until such time as selling made financial sense.
Mr Tsang admitted the intervention would lead to a reduction in Hong Kong's foreign reserves but said this was not a problem.
'The money we used in the intervention should not be considered a loss,' he said.
'We have switched part of our foreign reserves into blue chips, which have been bought at very good prices.
'The Exchange Fund intends to hold these stocks for a while and they should be a very good long-term investment.' Stock exchange council member Syed Bokhary said the Government might generate good returns from the investment.
'The Government may need to hold it for two or three years for good returns,' he said.
'It will make the market more volatile if the Government sells the holdings in the near future.' Former Hong Kong Stockbrokers Association chairman Chu Chung-tin supported the Government's decision to invest in the local stock market.
'The Exchange Fund has invested into the US and European securities markets. I don't see why the fund should not invest in local securities,' he said.
'It will stabilise the local market and boost the confidence of small investors.' But Democratic Party financial affairs spokesman Albert Ho Chun-yan opposed the move.
'The Exchange Fund faces market risk now that it has invested in the market,' he said.
'The Government should only be the regulator of the market. It should not become one of the players.' He said he believed the Government's action would undermine Hong Kong's reputation as a free market.
