HKMA outlines role for Government's portfolio custodian
A company formed to manage the Government's estimated $120 billion share portfolio will be charged with taking 'all necessary steps' to safeguard the interests of the shareholder.
The Hong Kong Monetary Authority outlined the role and duties of Exchange Fund Investment in a letter of appointment.
The letter said the company had to 'take all such steps as may be necessary or expedient to safeguard the interests and rights of the SAR Government as the shareholder in these corporations'.
The contents of the portfolio, amassed during the Government's stock-market intervention in August, are expected to be announced when the company is set up this month.
It said the company would need to attend to all 'corporate action' matters, advising the Government on voting decisions related to companies whose shares are held by the Exchange Fund.
This includes all rights offerings, subscription rights or other corporate actions that may require payment of additional money from the shareholders.
Within seven days of receiving a recommendation from the company, the monetary authority will give written instructions to the company on how to vote.
The company is not allowed to take any action whereby the Exchange Fund portfolio may become subject to any rights or encumbrances in favour of any third party.
The company must manage and administrate the stock investment portfolio 'in a passive manner' and 'would not undertake active trading' in the domestic stock market, it said.
However, the company would also have the duty to buy in the stock market when it is considered there were good opportunities to increase the asset value of the Exchange Fund stock portfolio. It would need to advise the Financial Secretary on the appropriate timing to dispose of all, or part, of the portfolio in a manner that would be in keeping with an orderly market.
The company would not be allowed to borrow for the Exchange Fund investment portfolio.
The company would need to send a statement to the authority detailing the value of the portfolio within seven business days after the end of each month.
