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Exchange Fund Position at end-June 2022
The following is issued on behalf of the Hong Kong Monetary Authority:
     The Hong Kong Monetary Authority (HKMA) today (29 July) published the unaudited financial position of the Exchange Fund at end-June 2022.

     The Exchange Fund recorded an investment loss of HK$144.2 billion in the first half of 2022. The main components were:
  • losses on bonds of HK$55.9 billion;
  • losses on Hong Kong equities of HK$8.5 billion;
  • losses on other equities of HK$73.2 billion;
  • negative currency translation effect of HK$12.8 billion on
    non-Hong Kong dollar assets (Note 1); and
  • gains on other investments of HK$6.2 billion (Note 2).
     Fees on placements by the Fiscal Reserves and placements by HKSAR Government funds and statutory bodies were HK$20.4 billion (Note 3) and HK$10.6 billion respectively in the first half of 2022, with the rate of fee payment at 5.6 per cent for 2022.

     Total assets of the Exchange Fund stood at HK$4,210.5 billion at end-June 2022, a decrease of HK$359.7 billion from the end of 2021. Accumulated surplus stood at HK$607.9 billion at end-June 2022.

     The Chief Executive of the HKMA, Mr Eddie Yue, said, "The global financial markets struggled in the first half of 2022, facing intensifying inflationary pressures, tightening of monetary policies by major central banks, geopolitical conflicts and global economic slowdown. As a result, the investment environment deteriorated sharply accompanied by the rare occurrence of simultaneous slump in global bond and equity markets. In particular, the Bloomberg US Treasury Index and the S&P 500 Index recorded the worst performance since 1973 and 1970 respectively. Moreover, the sharp appreciation of the US dollar against major currencies has also led to translation losses among foreign currency investments. In the face of the unprecedented difficult market conditions, the Exchange Fund's bond, equity and foreign currency investments suffered losses in the first half of this year. Overall, the Exchange Fund registered its biggest investment loss in this six-month period. Nevertheless, in terms of rate of return, the losses accounted for 3 per cent of the Exchange Fund's assets, which is smaller than the losses registered by global bond and equity markets (14 per cent and 21 per cent respectively (Note 4)). The Exchange Fund's long-term asset allocation and defensive measures have helped stabilise medium and long-term investment return."

     He added, "Looking ahead into the second half of 2022, challenging global investment conditions will continue to linger, such as further tightening of monetary policies by central banks amid persistently high inflation, further deterioration of geopolitical risks, and intensifying risk of recession in major economies. This may lead to higher volatility in asset markets. In this connection, we believe the investment environment will continue to be tough for the remaining part of the year.

     Notwithstanding the volatile market conditions, the Exchange Fund will adhere to its investment principle of 'capital preservation first while maintaining long-term growth' without being distracted by fluctuations in short-term returns. The HKMA will continue to diversify investments to further stabilise the Exchange Fund's returns with a view to achieving its long-term investment objectives."

Note 1: This is primarily the effect of translating 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 2022. Valuations of these investments from April to June are not yet available.
Note 3: This does not include the 2022 fee payment to the Future Fund because such amount will only be disclosed when the composite rate for 2022 is available.
Note 4: The figures are based on the declines in the Bloomberg Global Aggregate Total Return Index and the MSCI All Country World Index during the first half of the year, as measured in US dollar terms.
Ends/Friday, July 29, 2022
Issued at HKT 16:30
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