Exchange Fund’s first half investments gain HK$126.5 billion, up 185pc

The return is almost double last year’s as a whole (HK$68.1b) and three times that of the first half of last year (HK$44.3b)

PUBLISHED : Thursday, 27 July, 2017, 7:02pm
UPDATED : Thursday, 27 July, 2017, 11:08pm

Hong Kong’s Exchange Fund, the city’s reserves and cash arsenal for defending the city’s currency, has reported that first half investment return rose 185 per cent to HK$126.5 billion (US$16.185 billion) thanks to the global stock market rally, according to Hong Kong Monetary Authority which manages it.

The first half year return almost double last year’s as a whole at HK$68.1 billion (US$8.7 billion) and almost three times the return of the first half of last year of HK$44.3 billion.

Reported gains on Hong Kong equities were HK$27.8 billion, with other overseas stocks at HK$40.1 billion. There was also a gain of HK$16.5 billion in bond values, currency translation earnings were HK$34.3 billion, and other investment brought in HK$7.8 billion.

The latest quarterly gain, however, dropped slightly with a return recorded at HK$61.6 billion, down 5 per cent from the HK$64.9 billion in the first quarter.

The government will earn a return of HK$11.4 billion from the Exchange Fund as a result of the above figures.

The fund’s total assets stood at HK$3.904 trillion at the end of June 2017, an increase of HK$286.2 billion compared with the end of last year.

“Global financial markets finished the first half of the year in positive mood in general,” said Norman Chan Tak-lam, chief executive of the HKMA.

“Global equity markets, including Hong Kong’s, performed well and accordingly the Exchange Fund’s equity investment portfolio achieved income of HK$68 billion.”

He warned, however, challenges still lie ahead.

“The positive trend of global financial markets in the first half of the year may not be sustainable. The investment environment in the second half is still fraught with uncertainties,” he said.

Those include the US interest rate rise, the negotiations over Brexit by Britain to leave the European Union, and other geopolitical tensions in various regions of the globe.

“These uncertainties could easily affect market sentiment, leading to an adjustment in asset markets. We face a complex and unstable investment environment,” he added.

Chan said the HKMA will continue to manage the Exchange Fund prudently and keep its portfolio diversified.

Louis Tse Ming-kwong, managing director of VC Asset Management, said the Exchange Fund performance would likely to be solid in the second half of this year.

“The stock markets in Hong Kong and worldwide are on a rising trend with the improved economy. The US interest rate rise is well expected but that’s not high enough to hurt market sentiment. The bond and currency markets also turned more stable this year,” Tse said.

“The HKMA has already achieve the best first half year return for the Exchange Fung. The performance of the second half of this year may slow down a bit but the outlook remains positive. The Exchange Fund may be poised to have its best performing year on record,” Tse said.