Exchange Fund Results for 2013

The Hong Kong Monetary Authority (HKMA) announced today (Thursday) the Exchange Fund results (Note 1) for 2013.

The Exchange Fund recorded an investment income of HK$75.9 billion in 2013.  The main components were:

• a valuation gain on, and dividends from, Hong Kong equities amounting to HK$10.1 billion;
• a valuation gain on, and dividends from, other equities amounting to HK$71.6 billion;
• a valuation loss, net of interest, on bonds of HK$19.1 billion;
• a valuation gain on other investments (Note 2) amounting to HK$11.7 billion; and
• an exchange valuation gain of HK$1.6 billion.

Fee payments to the Fiscal Reserves amounted to HK$36.8 billion in 2013.  Fee payments on placements by HKSAR government funds and statutory bodies amounted to HK$9.3 billion.  After deducting the fee payments, interest and other expenses, the Accumulated Surplus (Note 3) recorded an increase of HK$13.4 billion (Annex 1).

The Abridged Balance Sheet (Annex 2) shows that the total assets of the Exchange Fund increased by HK$248.9 billion, from HK$2,781.1 billion at the end of 2012 to HK$3,030.0 billion at the end of 2013.  The increase is mainly attributable to increases in the Certificates of Indebtedness, bank borrowings and placements received from Fiscal Reserves, HKSAR government funds and statutory bodies.

The 2013 Exchange Fund investment return is 2.7% (Chart 1) (Note 4).  Specifically, the Investment Portfolio, which does not include the Long-Term Growth Portfolio, achieved a rate of return of 4.9%.  To reflect the long-term nature of the Fund, the HKMA is also releasing the average investment returns of the Exchange Fund over a number of different time horizons.  The average return was 2.7% over the last three years, 3.5% over the last five years, 4.1% over the last ten years, and 5.4% since 1994 (Note 5).

On the outlook for the coming year, Mr Norman Chan, Chief Executive of the HKMA, said, “The global financial environment and investment climate will no doubt be driven by the pace and the scale of the Fed’s exit from Quantitative Easing and the consequential reactions of the US and global interest rates.  There remain uncertainties about the sustainability of the economic recovery in the US and Europe, as well as possible outflow of funds from emerging markets, like what we saw in May and June last year.  The HKMA will continue to manage the Exchange Fund prudently, strengthen the defensive position of our US bond holdings, and step up our investment diversification with a view to enhancing medium- to long-term returns for the Exchange Fund.”

Note 1:      Unaudited figures.
Note 2:      This is the valuation change of investments held by investment holding subsidiaries of the Exchange Fund.
Note 3:      This includes gain from the Strategic Portfolio but excludes income from the investment holding companies.
Note 4:      This return excludes the performance of the Strategic Portfolio.
Note 5:      Averages over different time horizons are calculated on an annually compounded basis.

Annex 1:   Exchange Fund Results
Annex 2:   Exchange Fund Abridged Balance Sheet
Chart 1:     Investment Return of the Exchange Fund (1994 to 2013) 

Remarks by Mr Norman T.L. Chan, Chief Executive of Hong Kong Monetary Authority (PDF File, 28KB)

Powerpoint Presentation (PDF File, 1.66MB)

Hong Kong Monetary Authority
23 January 2014