The Hong Kong Monetary Authority (HKMA) announced today
(Thursday) the operating results* of the Exchange Fund for
the year 2002.
The Exchange Fund recorded an investment income of HK$47 billion
in 2002. The main components of this income were (Annex
1):
- income and valuation gains of HK$54.3 billion from bonds and
other investments;
- a valuation loss of HK$11.8 billion on the Hong Kong equities
portfolio (net of dividends);
- a valuation loss of HK$22.8 billion on other equities (net of
dividends); and
- an exchange valuation gain of HK$27.3 billion, mainly as a
result of the appreciation of the euro against the US dollar.
Commenting on the operating results for the year, Mr Joseph Yam,
Chief Executive of the HKMA, said that the slowdown in global
economic recovery in the latter half of 2002 had been positive for
bonds but negative for equities. The Exchange Fund had benefited
from overweighting bonds and underweighting equities. The strength
of the euro had also contributed to the investment performance.
Although direct comparisons are not always easy or appropriate,
generally speaking, the Exchange Fund achieved an investment return
that was favourable in comparison to that of other similar funds in
the private sector (Annex 2). In 2002, the Exchange Fund achieved
an investment return of 5.1%, which is 120 basis points above the
return of its strategic investment benchmark. Since the adoption of
the current strategic investment benchmark four years ago, the
Exchange Fund has achieved a compounded 5.3% annual return, or an
annual out-performance of 190 basis points above the benchmark's
compounded 3.4% annual return for the same period. Since 1994, the
Exchange Fund has generated an average annual return of 6.4%,
compared with the average annual inflation rate of 1.7% over the
same period (Chart 1).
The Abridged Balance Sheet (Annex 3)
shows that in 2002 the total assets of the Exchange Fund decreased
by HK$24 billion, from HK$979.1 billion at the end of December 2001
to HK$955.1 billion at the end of December 2002. While net
drawdowns of the fiscal reserves, amounting to HK$78.9 billion,
were the main reason for the decrease in total assets in 2002, this
decrease was partly compensated for by net investment income of
HK$40.4 billion (Annex 4). The Fiscal Reserves' share of this
net investment income for the year amounted to HK$15.7 billion. The
balance of HK$24.7 billion has been added to the Exchange Fund's
Accumulated Surplus for 2002.
Commenting on the prospects for 2003, Mr Yam said that the
investment climate was even more murky than in 2002. Further gains
from the bond markets were likely to be limited, since interest
rates were at historic lows. Uncertainties surrounding the strength
of the US economy were complicated by geo-political factors and by
the despondent mood of investors bruised by three consecutive years
of negative equity returns. Until the outlook became clearer, the
markets were expected to be volatile.
An accompanying Statement of Valuation of the Hong Kong Equity
Portfolio is published (Annex 5), showing that the market value of the
equity investments of the Portfolio at the end of December 2002
amounted to HK$50.9 billion. These holdings, representing what
remains after the completion of the disposal programme for the
stocks originally purchased in August 1998, have become part of the
Exchange Fund's investment portfolio.
*Unaudited figures for
2002
Attachments
Annex
1: Exchange Fund Performance
Annex
2: Supplementary Figures
Annex
3: Exchange Fund - Abridged Balance Sheet as at 31 December
2002
Annex
4: Exchange Fund - Change in Accumulated Surplus
Annex
5: Statement of Valuation of the Hong Kong Equity Portfolio
Chart
1: History of Investment Return of Exchange Fund (1994 to
2002)
Powerpoint Presentation
For further enquiries, please contact:
Thomas Chan, Senior Manager (Press), at 2878 1480 or
Jasmin Fung, Manager (Press), at 2878 8246
Hong Kong Monetary Authority
16 January 2003
