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The following is issued on behalf of the Hong Kong Monetary Authority:
The Hong Kong Monetary Authority (HKMA) today (July 29) published the unaudited financial position of the Exchange Fund at end-June 2015.
The Exchange Fund recorded an investment income of HK$20.4 billion in the first half of 2015. The main components were as follows:
* gains on Hong Kong equities amounting to HK$18.8 billion;
* gains on other equities amounting to HK$20.5 billion;
* gains on bonds of HK$4.5 billion;
* negative currency translation effect on non-Hong Kong dollar assets amounting to HK$25.1 billion (Note 1); and
* gains on other investments amounting to HK$1.7 billion (Note 2).
Fees on placements by the Fiscal Reserves and placements by HKSAR Government funds and other statutory bodies were HK$22.8 billion and HK$7.2 billion respectively in the first half of 2015 (the fixed rate of fee payment for 2015 is 5.5 per cent). After deducting the fees, interest and other expenses, the Accumulated Surplus (Note 3) of the Exchange Fund recorded a decrease of HK$7.4 billion (Annexes 1 and 2).
Total assets of the Exchange Fund stood at HK$3,316 billion at the end of June 2015, an increase of HK$167 billion compared with the end of 2014.
Commenting on the Exchange Fund results for the first half of 2015, the Chief Executive of the HKMA, Mr Norman Chan, said, "The financial markets were highly volatile in the first half of the year. On the foreign exchange front, with a strong US dollar in the first quarter, the Exchange Fund's non-US dollar foreign currency assets (mainly consisting of bonds and equities) recorded a negative currency translation effect of over HK$30 billion. The amount was reduced to HK$25.1 billion at the end of June as a result of the softening of the US dollar in the second quarter. The equity portfolio recorded gains of HK$27.6 billion in the first quarter when major overseas equity markets were buoyant. However, investment sentiment turned negative in the second quarter amid the heightened Greek default risk, triggering a fall in both the European and US equity markets. This, coupled with corrections in the Mainland stock markets in the latter part of June, reduced the gains on equity investments in the second quarter. As for bonds, with better than expected economic data in major economies, including the US and Europe, in the second quarter, global bond markets consolidated during May and June. Major sovereign bond yields came up markedly, including the mid- and long-end of the US Treasuries and German Bunds. This resulted in falling bond prices and hence, brought down the gains on bond investments to HK$4.5 billion in the first half of the year."
Looking ahead, Mr Chan said, "The global macroeconomic environment and financial markets will remain highly uncertain in the second half of the year, clouding the investment outlook. As the start of the US interest rate normalisation draws closer, the timing and trajectory of the US rate hikes will have strong bearing on global financial markets. The aftermath of the Greek debt crisis, the development of the Mainland equity markets and other uncertainties will likely bring continuing volatilities to the financial markets, and the investment environment will be more challenging. The HKMA will continue to manage the Exchange Fund cautiously and prudently."
Note 1: This is primarily the effect of translating non-US dollar foreign currency assets into Hong Kong dollar after deducting the portion for currency hedging.
Note 2: This is the valuation change of investments held by investment holding subsidiaries of the Exchange Fund. This figure represents valuation changes up to the end of March 2015. Valuations of these investments from April to June are not yet available.
Note 3: This includes gains from the Strategic Portfolio but excludes gains from the investment holding subsidiaries.
Ends/Wednesday, July 29, 2015
Issued at HKT 16:41
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