Exchange Fund Position at end-June 2013

The Hong Kong Monetary Authority (HKMA) today (Friday) published the position of the Exchange Fund (Note 1) at end-June 2013.

The main components of the investment income of the Exchange Fund for the first half of 2013 were as follows:

• a valuation gain on, and dividends from, equities outside Hong Kong amounting to HK$31.1 billion
• a valuation loss, net of dividends, on Hong Kong equities amounting to HK$7.5 billion
• a valuation loss, net of interest, on bonds of HK$16.8 billion
• an exchange valuation loss of HK$15.7 billion
• a valuation gain on other investments (Note 2) amounting to HK$2.8 billion.

The Exchange Fund recorded an investment loss of HK$6.1 billion in the first half of 2013.

Fee payments to the Fiscal Reserves amounted to HK$18.8 billion in the first half of 2013.  Fee payments on placements by HKSAR government funds and other statutory bodies amounted to HK$4.2 billion.  After deducting the fee payments, interest and other expenses, the Accumulated Surplus (Note 3) recorded a decrease of HK$35.1 billion (Annex 1).

Total assets of the Exchange Fund stood at HK$2,847.2 billion at the end of June 2013, an increase of HK$66.1 billion compared with the end of 2012 (Annex 2).

Commenting on the Exchange Fund results for the first half of 2013, Mr Norman Chan, Chief Executive of the HKMA, said, “Early this year when we announced the results of the Exchange Fund in 2012, we pointed out that the global financial markets would be facing many uncertainties in the year ahead. As it turned out, the global equities, bonds and foreign exchange markets all went through considerable fluctuations in the first half of the year.  The bond market, in particular, was highly volatile in June. Despite the precautionary measures we had taken and the adjustments made to our investment strategy, the Exchange Fund recorded a small investment loss in the first half of 2013 as a result of the extremely volatile market environment.”

Looking ahead, Mr Chan said, “With the heightening of market expectations about the US Fed’s exit from quantitative easing and the many uncertainties in the global economy, it is expected that volatilities in the financial markets will continue or even intensify in the near future.  The investment environment will be very challenging.  The HKMA, while maintaining its prudent and conservative investment strategy, will continue to closely monitor market developments and make adjustments as appropriate to enhance the Exchange Fund’s resilience against market fluctuations.”

Note 1:     Unaudited figures.
Note 2:     This is the valuation change of investment held by investment holding subsidiaries of the Exchange Fund.
Note 3:      This includes loss from the Strategic Portfolio (HK$0.9 billion) but excludes gains from the investment holding subsidiaries.

Annex 1:   Exchange Fund Results
Annex 2:   Exchange Fund Abridged Balance Sheet
Annex 3:   Supplementary Figures

Hong Kong Monetary Authority
26 July 2013