Exchange Fund's Statutory Purposes and Investment Objectives

The Exchange Fund’s Statutory Purposes

The Exchange Fund's statutory purpose, as defined in the Exchange Fund Ordinance, is primarily to affect, either directly or indirectly, the exchange value of the currency of Hong Kong. Its functions were extended with the enactment of the Exchange Fund (Amendment) Ordinance 1992 by introducing a secondary and subsidiary purpose of maintaining the stability and integrity of Hong Kong's monetary and financial systems, with a view to maintaining Hong Kong as an international financial centre. Underpinned by such purpose, the Exchange Fund has played a crucial role in helping Hong Kong weather various banking and financial crises in the past few decades.

The Last Line of Defence in Times of Crises

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1980s

Banking Crisis

In the 1980s when several banks were on the brink of closure, the Government used the Exchange Fund to take over or provide guarantee for the banks.
1987

Stock Market Crash

During the stock market crash in 1987, the Government used the Exchange Fund to support the futures market to prevent its collapse.
1991

Bank Runs

In 1991, the Exchange Fund was used to provide liquidity support to a few banks that were experiencing runs.
1998

Asian Financial Crisis

In August 1998, the Government used the Exchange Fund to counter an attack on Hong Kong currency and stock markets by some international financial market predators.
2008

Global Financial Crisis

In the wake of the global financial crisis in October 2008, the Exchange Fund provided a full guarantee for all deposits in Hong Kong as well as liquidity and capital support to banks to maintain market and public confidence in Hong Kong’s financial systems.

The Exchange Fund’s Investment Objectives

Taking into full account of the Exchange Fund’s statutory purposes, the Financial Secretary, on advice of the Exchange Fund Advisory Committee (EFAC), has set the following investment objectives for the Exchange Fund:

To preserve capital;
To ensure the entire Monetary Base, at all times, is fully backed by highly liquid US dollar-denominated assets;
To ensure sufficient liquidity is available for the purposes of maintaining monetary and financial stability;
Subject to (a)–(c), to achieve an investment return that will help preserve the Exchange Fund’s long-term purchasing power.

The Exchange Fund’s Investment Objectives

Last revision date : 26 August 2019