Hong Kong’s Exchange Fund says net income rises in Q1 as forex losses offset by stock, bond gains
HK$33.2b first-quarter loss on foreign currency offset by gains in stocks, bonds, Legco panel told
The fund's investment income stood at HK$6.6 billion in the first quarter, down from HK$11.1 billion in the first quarter last year but up 8.2 per cent from the HK$6.1 billion in the fourth quarter of last year.
The heavy loss on its foreign currency holdings was offset by strong gains in stocks and bonds, Hong Kong Monetary Authority chief executive Norman Chan Tak-lam told members of the Legislative Council's financial affairs panel.
Forex losses were also to blame for the fund posting its fourth-worst earnings on record last year, with investment income of HK$44.7 billion - a meagre 1.4 per cent return - prompting several lawmakers to urge the authority to review its investments.
"Can the Exchange Fund change its currency holdings to cut down its forex losses? It has lost over HK$85 billion since last year, which is substantial," said Democrat Sin Chung-kai.
"The Exchange Fund can earn good gains from forex investment when the US dollar turns weaker," he said. "In 2006 to 2007, the Exchange Fund gained HK$30 billion. In 2002 to 2003, it earned HK$50 billion from forex gains."
The HKMA manages the HK$3.22 trillion fund, which is used to defend the Hong Kong dollar. It invests the fund, which includes the government's fiscal reserves and other assets, in stocks, bonds, property and currencies. The fund paid HK$11.4 billion to the government in the first quarter.
The valuation gain on its Hong Kong stock holdings in the first quarter was HK$9.1 billion, almost double the HK$4.8 billion in the fourth quarter of last year and exceeding the HK$6.5 billion for all of last year.
