Exchange Fund Balance Sheet for end-June published

The Hong Kong Monetary Authority (HKMA) today (Thursday) published the unaudited balance sheet of the Exchange Fund for the end of June 2004 (Annex 1). The balance sheet shows that in the first half of 2004.

• the Accumulated Surplus of the Exchange Fund increased by HK$5.1 billion to HK$389.9 billion at the end of June 2004
• the total assets of the Exchange Fund increased by HK$36.1 billion to HK$1,047.8 billion at the end of June 2004.

The foreign exchange assets of the Exchange Fund increased by US$2.4 billion, from US$118.4 billion at the end of December 2003 to US$120.8 billion at the end of June 2004.

The Exchange Fund recorded investment income of HK$9.6 billion in the first half of 2004. The main components of this income were (Table 1 of Annex 2)

• a gain of HK$6.3 billion from bonds and other investments
• an exchange loss of HK$2.0 billion, mainly due to movements in the euro
• a loss of HK$0.4 billion on the Hong Kong equities portfolio
• a gain of HK$5.7 billion on other equities.

After deducting HK$2.1 billion of interest and other costs and HK$2.4 billion representing the sharing of investment income by the fiscal reserves placed with the Exchange Fund, the Accumulated Surplus registered an increase of HK$5.1 billion.

Mr Joseph Yam, Chief Executive of the HKMA, noted the extremely difficult global market conditions in the first six months of 2004. "After a promising first quarter, financial markets fell on heightened inflationary concerns. High oil prices and geo-political tensions gave rise to very volatile bond, equity and currency markets. Despite market fluctuations, the Exchange Fund recorded an investment income of HK$9.6 billion in the first half of 2004," Mr Yam said.

Looking ahead, Mr Yam warned that the very difficult investment environment could persist for the remainder of the year, as financial markets re-adjusted to a less certain interest rate outlook and the associated impact on global growth. "The HKMA will, as always, exercise prudence in its management of the Exchange Fund with the aim of achieving a balance in terms of return, risk and liquidity, in compliance with the guidelines set by the Financial Secretary with the advice of the Exchange Fund Advisory Committee," Mr Yam said.

Attachments

Annex 1: Exchange Fund Balance Sheet
Annex 2: Supplementary Figures

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
29 July 2004