Hong Kong’s Exchange Fund posts 55 per cent drop third quarter income amid stock slump, political turmoil
- Income from investment in bonds, as well as holdings in local and foreign equities, worsens in the latest quarter
- Hong Kong government gets HK$7.3 billion in third quarter for placing its fiscal reserves with the Fund
Hong Kong's Exchange Fund, the war chest used to defend the local currency from attacks by short sellers, has reported a 55 per cent drop in third quarter income, hurt by a stock market slump amid the city’s worst political crisis.
Investment income fell to HK$20.2 billion (US$2.58 billion) from HK$45 billion in the April-June quarter, according to a report submitted by the Hong Kong Monetary Authority to a panel in the Legislative Council on Monday. The income compares with HK$9.5 billion from a year earlier.
Losses from the Fund’s bets on Hong Kong equities widened to HK$12.3 billion in the latest quarter from HK$500 million in the second quarter, showing the full brunt of anti-government protests on its holdings and the broader stock market. The benchmark Hang Seng Index fell 8.6 per cent in that time, the worst in four years.
The performance reflects the challenges facing HKMA’s Chief Executive Eddie Yue Wai-man in bolstering the war chest to support its 36-year old peg to the US dollar in a weakening economy. A government report last week confirmed the city has slipped into a technical recession last quarter, as five months of street protests hurt everything from retail sales to tourism and home prices.
Other parts of the Fund’s investments have also suffered. Its holdings in foreign equities declined by 70 per cent to HK$4.6 billion from the second quarter, today’s report shows. The MSCI World Index of global stocks was little changed, after rallying 3.4 per cent in the second quarter, as the lingering US-China trade war heightened concerns about a global recession.