Exchange Fund bounces back by HK$100b
The Exchange Fund has rebounded by HK$100 billion this year, not only recovering the losses it recorded earlier this year but boosting government coffers by tens of billions of dollars if the market stays firm.
But a veteran banker warned that the chief executive should be careful before announcing more relief in his upcoming policy address as the global market remained highly volatile.
Hong Kong Monetary Authority chief executive Joseph Yam Chi-kwong, who announced the good news just five days before his departure, agreed.
'The economic performance was pretty much out of line with the financial market, and when economic factors are reflected in the financial market, there may be adjustments [to the gain],' he said. 'We still have to wait for figures from the fourth quarter.'
The Hang Seng Index has risen more than 50 per cent in the past six months, from around 13,000 points to more than 21,000 this month.
The Exchange Fund, a reserve that backs the Hong Kong dollar, rebounded in the second quarter with investment gains of HK$58.5 billion, offsetting a HK$33.5 billion fall in the first three months.
According to Yam's latest disclosure, the third-quarter gain stands at HK$75 billion.
The fund gave the government HK$17.6 billion in the first six months and will bring in a similar amount, if not more, by the end of the year if the market remains strong.
But Law Ka-chung, chief economist and strategist at Hong Kong's Bank of Communications, was guarded. 'We shouldn't be too excited until the last minute as there may be an adjustment in the fourth quarter,' he said.
Law said the government should hesitate before giving more relief in next month's policy address because the global market remained unstable.
In the 16 years since the founding of the authority, the reserve has grown from HK$280 billion to about HK$1.9 trillion, with an accumulated profit amounting to HK$550 billion.
Yam told the RTHK yesterday he did not believe the profits should be given directly to the public.
'There is a huge storm out there,' he said. 'Do not take it for granted that we can maintain our banking system's stability.'
The public could still benefit indirectly from the reserve because it provided a stable source of income for the government during bad economic times.
Yam, who is due to step down on Thursday, said he had no retirement plans yet, except a holiday to Japan with his wife. But he said he would be happy to stay and work in the financial field.
'My heart lies with Hong Kong and the country,' he said. 'I will be happy to serve and contribute my ability when opportunities arise.'
Yam said he would prefer a position that would allow him to stay close to China's financial market, rather than one that would make him a lone voice in an international institute.
'China will be a crucial centre of financial development in the next decade,' he said. 'I would rather be close than away [from this centre].'
Word in the market is that Yam - perhaps the best-paid central banker in the world on about HK$10 million a year, will join the People's Bank of China as a honorary consultant.
But he said there was no plan for such a move at present.
Norman Chan Tak-lam, former director of the Chief Executive's Office, will succeed Yam.
Money in the bank
The reserve has mushroomed in the past 16 years
As of September, the value of the Exchange Fund in HK dollars was: $1.9tr
