Hong Kong’s Exchange Fund reports investment gains of HK$24.1b in sharp turnaround
The Exchange Fund, Hong Kong’s reserve fund to defend its currency, reported an investment income of HK$24.1 billion for the first quarter of this year as strong gains in bonds and foreign exchange holdings offset losses in its stocks investment, according to the Hong Kong Monetary Authority (HKMA).
The first-quarter investment income was a turnaround from the investment losses of HK$15.8 billion for the whole of last year – its second-worst performance ever and its first loss since the global financial crisis in 2008 – as heavy foreign-exchange losses and poor returns from equity investments took their toll. It also marks a 190 per cent advance from the HK$8.3 billion investment income in the first quarter of last year.
The HKMA invests the fund, which includes the government’s fiscal reserves and other assets, in stocks, bonds and properties. The fund is used to maintain financial stability, including defending the peg at 7.80.
“Investment markets worldwide in the first two months of this year have been volatile but turned stable in March,” HKMA chief executive Norman Chan Tak-lam told Hong Kong lawmakers in a monthly Financial Affairs Panel meeting on Monday.
The Exchange Fund’s investment performance was mainly driven by gains from its bond investments in the first quarter, which stood at HK$25 billion, up from HK$15.9 billion for the whole of last year.
HKMA deputy chief executive Eddie Yue said the volatility in stock markets prompted investors to opt for more conservative options such as bonds.
The fund made foreign-exchange gains of HK$15.2 billion in the first quarter, compared with foreign-exchange losses of HK$44.9 billion last year as a whole.
The gains in bonds and foreign exchange were offset by losses in the stock markets. Losses on its investments in Hong Kong stocks amounted to HK$6.2 billion, compared with a loss of HK$5 billion for the whole of last year and a gain of HK$6.5 billion in 2014.
Losses from overseas stocks, meanwhile, stood at HK$9.9 billion, compared with a gain of HK$7.1 billion for the whole of last year and a gain of HK$33.7 billion the previous year.
The Exchange Fund paid HK$6 billion to the government in the first quarter, compared with HK$46 billion last year as a whole.
Chan also said Hong Kong’s property market stabilised in March after falling in the first two months of this year.
“The HKMA would need more time to review the property market to confirm if it is on a downward cycle before we make changes to the mortgage policy,” Chan said.
Several lawmakers have said banks have been reluctant to lend to small and medium-sized enterprises while some have been finding it increasingly hard to open bank accounts because of new restrictions.
Chan said the HKMA would work with the banking sector to address these issues.