Hong Kong’s Exchange Fund posts record first-quarter returns due to investment gains in stocks, bonds and currencies
- The HK$4 trillion (US$509.86 billion) fund, used to defend the local currency, reported first-quarter investment returns of HK$120.9 billion
- The fund’s returns were lifted by its investment gains in bonds, stocks and foreign exchange
The Exchange Fund, Hong Kong’s war chest for keeping the city’s currency stable against short sellers, has reported its best first quarter on record, as stock market rallies around the world bolstered the returns on its investments.
Investment returns more than tripled to HK$120.9 billion (US$15.4 billion) in the first three months of 2019, from HK$35 billion in the same quarter last year, according to the Hong Kong Monetary Authority (HKMA), the city’s de facto central bank. This is the ever strongest quarterly gain on record.
The main driver of the fund’s growth had been its stock market investments, where gains in its Hong Kong equity holdings jumped 11 times to HK$20.8 billion during the quarter, from HK$1.7 billion last year.
The city’s benchmark Hang Seng Index and the China Enterprises Index both rose by about 12.4 per cent during the period, wiping out last year’s 14 per cent loss, ranking as the 16th and 17th best-performing indices out of 94 global gauges tracked by Bloomberg. The market had been lifted by the Chinese government’s economic stimulus measures to maintain growth in Asia’s growth engine, and a dovish monetary policy stance by the US Federal Reserve to pause any increase in interest rates.
The Exchange Fund, which also invests outside Hong Kong, was also given a lift from stock market rallies elsewhere. Overseas equity investments returned the fund HK$49.9 billion in the first three months, compared with a loss of HK$7.4 billion last year.