Exchange Fund stares at first-quarter loss

Business | Kevin Xu 28 Apr 2020

The Exchange Fund will inevitably record a loss in the first quarter given the sharp correction in global equity markets, while each investor under the Mandatory Provident Fund lost about HK$21,295 in the first four months.

The de facto central bank, Hong Kong Monetary Authority, also sold HK$2.3 billion worth of Hong Kong dollars for the fifth time as the local dollar is still at the top of its trading range against the US dollar.

Amid the sudden outbreak of the coronavirus and the sharp volatility in financial markets, many institutional and retail investors recorded double-digit losses in terms of return in the first quarter, said Howard Lee, Chief Executive of the Exchange Fund Investment Office at HKMA.

However, the investment performance of the Exchange Fund should not be assessed solely by the figures of a single quarter, he said. "As a long-term investor, the Exchange Fund's objective is to achieve more stable returns in the medium and long term through investment diversification."

Lee notes that the future is still plagued with challenges with regard to the investment management of the Exchange Fund.

"At least in the near future, it is expected that the global economy will remain weak and corporates will face immense difficulties which may result in shocks to the financial markets, with further implications on the investment performance of the Exchange Fund," Lee said.

He added that the relaunch of quantitative easing in the US will weaken the effectiveness of risk diversification in the Exchange Fund through bond investment.

Meanwhile, each investor under the MPF earned an average of HK$4,513 in April, according to the MPF performance index by Gain Miles. The comprehensive indicator saw a 2.3 percent increase in April. However, the overall MPF saw a 9.6 percent loss so far this year, reflecting an average loss of HK$21,295 per investor.

Fixed-income funds are the top performer with a return of 0.3 percent so far this year, while equity funds are the worst performer with a 13.8 percent loss.

Elsewhere, a bond fund of Value Partners (0806) experienced large scale redemptions, which led to a shrinkage in the asset under management of the firm last month, said Cheah Cheng-hye, co-chairman and co-chief investment officer.

Value Partners previously said its AUM in March shrunk by around 20 percent month-on-month to US$10.9 billion (HK$85.02 billion).



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