Hong Kong’s Exchange Fund posts record US$25.8 billion loss after an ‘exceptionally volatile’ year, HKMA says

The Exchange Fund, the war chest used to defend the Hong Kong dollar from attacks by short-sellers, reported the worst year on record in 2022 as it lost HK$202.4 billion (US$25.8 billion) during a historically bad year in the global financial market, according to the Hong Kong Monetary Authority (HKMA).

The record annual loss, the first since 2015, compares with a gain of HK$191.9 billion in 2021. It is only the third time that the fund has reported an annual loss since the HKMA, which manages the fund, began disclosing annual results in 2000.

The loss, announced on Monday, far surpasses the fund’s first annual loss of HK$75 billion in 2008 amid the global financial crisis, which was followed by a HK$15.8 billion loss in 2015 in the wake of the Chinese stock market crash.

“Financial markets experienced an exceptionally volatile year,” HKMA CEO Eddie Yue Wai-man said at a press conference on Monday afternoon.

Last year was the only year in almost 50 years that returns from equities, bonds and major currencies against the US dollar all recorded negative returns simultaneously, Yue said, citing the Russia-Ukraine conflict and ongoing pandemic measures that disrupted global supply chains, fuelled inflation and prompted central banks to tighten their monetary policies.