Hong Kong’s Exchange Fund reports second best year ever in 2019 even as returns weaken in the latter half due to protests
- Investment income increased to HK$247.2 billion (US$31.8 billion) for the full year, compared with HK$10.9 billion in 2018
- Accommodative central bank monetary policies lent support to the equity and bond markets, helping the Exchange Fund achieve a decent return on its investments, said Eddie Yue Wai-man, the HKMA chief executive
Hong Kong’s Exchange Fund, the war chest used to defend the local currency from attacks by short sellers, reported its second highest investment income on record in 2019 despite weaker returns in the second half of the year as the city underwent one of its worst political crises.
Investment income increased to HK$247.2 billion (US$31.8 billion) for the full year, compared with HK$10.9 billion in 2018. The fund had investment income of HK$252 billion in 2017, its highest ever annual return.
The fund was hit hard in 2018 as worries over the US-China trade war and China’s slowing economy weighed on Asian indices, reporting an investment loss of HK$33.6 billion in the fourth quarter of 2018. Hong Kong stocks dropped by almost 14 per cent in 2018.
Equity markets recovered in the first quarter of 2019 and the fund benefited from gains on government bonds as the US Federal Reserve moved to lower interest rates.
“Global financial markets were clouded by the slowdown of global economic growth and US-China trade tensions during 2019,” Eddie Yue Wai-man, the Hong Kong Monetary Authority chief executive, said at a press conference. “However, accommodative monetary policies by major central banks lent support to the equity and bond markets. With this favourable environment, the Exchange Fund achieved a decent return on equity and bond investment.”