Hong Kong’s Exchange Fund, which backs the local dollar, posted an investment income of HK$34.5 billion last quarter, as it suffered a HK$16 billion loss from equities, the city’s de facto central bank said.
Excluding the return on other investments, which is not yet available, the fund’s profit dropped by 48.7 percent in the quarter from the year prior, the Hong Kong Monetary Authority said in a briefing to the Legislative Council on Monday.
By categories, Hong Kong equities swung to a loss of HK$5 billion from a gain of HK$16.4 billion last year, while losses from other equities widened by nearly 3 times to HK$11 billion.
Gains from bonds amounted to HK$24.6 billion in the three months, down by 39.4 percent, but the fund also recorded a positive currency translation effect of HK$25.9 billion on non-Hong Kong dollar assets in the quarter, nearly doubling the figure from a year earlier.
The Exchange Fund paid HK$8.7 billion in total in fees to the government on placements of the fiscal reserves and other government funds and statutory bodies, with the rate of fee payment at 4.8 percent.
HKMA chief executive Eddie Yue Wai-man said it is difficult to predict investment performance this quarter, as both the equity and bond markets are on a roller coaster ride following the war in the Middle East.
The regulator will continue to implement appropriate defensive measures and maintain a high degree of liquidity in managing the fund amid a volatile investment environment, Yue said.
He reiterated that the de facto central bank has no plans to change the Linked Exchange Rate System, which pegs the local currency to the US dollar, when asked by lawmakers.
Global investors are still relying on the greenback, and the peg system provides stability for Hong Kong and enhances the attractiveness of the local market, Yue said.
It is also more difficult to peg to a basket of currencies from a technical perspective, he said.
𝗗𝗼𝘄𝗻𝗹𝗼𝗮𝗱 𝗧𝗵𝗲 𝗦𝘁𝗮𝗻𝗱𝗮𝗿𝗱 𝗔𝗽𝗽 ↓
