Exchange Fund third quarter investment return drops 97 per cent on year to HK$1.6 billion

The Exchange Fund, Hong Kong's war chest to defend the currency, reported a 97.4 per cent year-on-year decline in its investment return in the third quarter, as a result of its heavy loss in Hong Kong stocks and foreign currency-related holdings, according to the Hong Kong Monetary Authority on Monday.

The fund returned HK$1.6 billion (US$204.3 million) during the quarter, substantially lower than HK$61.8 billion a year earlier. However the result was still better than the second quarter return of HK$100 million.

The major drag on returns during the quarter was a foreign currency valuation loss of HK$16.2 billion. The Exchange Fund does not invest in foreign currencies but its overseas assets suffered a valuation loss when converted to Hong Kong dollars.

Another major factor in the third quarter is the fund’s Hong Kong equity holdings, which suffered a loss of HK$4.7 billion as the benchmark Hang Seng Index tumbled 4 per cent during the quarter.

This was offset by a HK$9.7 billion gain in bonds and a HK$12.8 billion gain in overseas equity investment.

For the first nine months, the Exchange Fund reported a gain at HK$36.7 billion, down 81 per cent from HK$198 billion a year earlier.

The Exchange Fund was worth HK$4.033 trillion (US$514.87 billion) as of the end of September.