Hong Kong Monetary Authority said on Tuesday that Hong Kong's Exchange Fund, which is used to back the Hong Kong dollar, rose by HK$36.7 billion in May, while the government posted a fiscal deficit of HK$30.3 billion in the two months ended May.
The total assets of the Exchange Fund amounted to HK$4.39 trillion in May, among which Hong Kong dollar assets decreased by HK$3.1 billion while foreign currency assets increased by HK$39.8 billion.
The rise in foreign currency assets was mainly due to interest income and mark-to-market revaluation of investments, and proceeds from the issuance of Government Bonds, which were partly offset by a reduction in the month-end balances of unsettled purchase of securities.
However, mark-to-market revaluation of Hong Kong equities mainly drove the decline in Hong Kong dollar assets, according to the HKMA.
This came as the Hong Kong government said expenditure for the period of April to May amounted to HK$125.1 billion and generated revenue of HK$60.9 billion.
The figure includes the proceeds of HK$37.4 billion received from the issuance of government bonds and the repayment of HK$3.5 billion principal on government bonds.
The fiscal reserves stood at HK$635.2 billion by the end of May.
A government spokesperson said that the deficit for the period was mainly because major revenue items, including salaries and profits taxes, are mostly received towards the end of a financial year.
In a separate statement, the HKMA said Hong Kong dollar deposits and foreign currency deposits in May grew by 1.2 percent and 3.2 percent, mainly reflecting fund flows of corporates.
Meanwhile, yuan deposits in Hong Kong increased by 5.3 percent in May to1.13 trillion yuan (HK$1.31 trillion), it added.
