Hong Kong Exchange Fund reports late surge in income as markets rebound, expanding currency war chest to US$581 billion
- Returns recovered over the course of the year after the coronavirus pandemic rattled markets in early 2020
- Exchange Fund’s war chest stood at HK$4.5 trillion even after 85 interventions in 2020 to protect its currency peg
Hong Kong’s Exchange Fund, the war chest used to defend the local currency from attacks by short sellers, recorded one of its best quarters in a pandemic-ravaged year, as profit surged from a rebound in local sentiment and a rally in global asset prices.
The late upturn in performance preserved the war chest at HK$4.5 trillion at the end of 2020, a comfortable level that allowed the HKMA to protect the local dollar within its peg to the US dollar. The de facto central bank intervened in the market 85 times in 2020, selling HK$383.5 billion to keep it within its trading band.
The Hong Kong government is expected to receive HK$32.6 billion of income for the full year, as the treasury places its fiscal reserves as part of its asset management. The other government bodies will receive HK$11.5 billion. The figure released by the HKMA did not include payments to Hong Kong’s Future Fund, which will be announced later.