Hong Kong’s Exchange Fund reports 94.7 per cent decline in returns amid massive stock market losses

The fund’s dismal performance comes after a record 2017 when it posted gains of HK$264 billion

HKMA’s Norman Chan Tak-lam says the fund will continue to adopt a defensive investment approach as global environment remains highly unpredictable

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Norman Chan Tak-lam, chief executive of the Hong Kong Monetary Authority, attends a press conference in Central to announce the performance of the Exchange Fund in 2018. Photo: K. Y. Cheng

Published: 9:01pm, 29 Jan 2019Updated: 1:36pm, 30 Jan 2019

A global stock market slump shrank the city’s war chest for defending the local currency, causing it to lose HK$59 billion (US$7.5 billion) in equity investments last year and driving its 2018 rate of returns to its third lowest on record.

The Exchange Fund’s overall returns last year fell 94.7 per cent to HK$13.9 billion on the back of a HK$20.7 billion loss alone in Hong Kong stock market investments. Returns from fixed income and other overseas properties and other longer term investment, offset the equities loss.

The Exchange Fund will pay the Hong Kong Government HK$43.8 billion made from its earnings, down from HK$46.2 billion in 2017.

(From left) Francis Chu, chief operating officer of the Exchange Fund Investment Office; Norman Chan Tak-lam, chief executive of the Hong Kong Monetary Authority; and Eddie Yue, CEO of the Exchange Fund Investment Office, at a press conference in Central to announce the performance of Exchange Fund in 2018. Photo: K. Y. Cheng

Norman Chan Tak-lam, the chief executive of Hong Kong Monetary Authority, said the HKMA will continue to adopt a defensive investment approach and diversify its investments so as to further strengthen the Exchange Fund’s resilience against market volatility.

“It is very likely that the investment environment in 2019 will remain as unpredictable and difficult as in 2018,” Chan said at the HKMA office as he announced the fund’s performance.