Key Information

Speeches by Speaker
Norman T.L. Chan
Peter Pang
Eddie Yue
Arthur Yuen
Zeti Akhtar Aziz
Raymond Li
Edmond Lau
Esmond Lee
Meena Datwani
Vincent W.S. Lee
James Lau
Joseph Yam
Y K Choi
William Ryback
David Carse
Tony Latter
Andrew Sheng
Hans Genberg
Simon Topping
Michael Taylor
The Honourable Donald Tsang
Chen Yuan
Dai Xianglong
Don Brash
Jaime Caruana
Andrew Crockett
Mario Draghi
David Eldon
Stanley Fischer
Timothy F. Geithner
Stephen Grenville
Kenneth G. Lay
William McDonough
Ernest Patrikis
Glenn Stevens
Jean-Claude Trichet
Tarisa Watanagase
Zeti Akhtar Aziz
Press Releases
Press Releases by Category
Bogus Voice Message Phone Calls
Banking in Hong Kong
Fraudulent Websites, E-mails and Telephone System, and other fraud cases
Granting of Banking Licences
Exchange Fund
Table of Multiples of Notes and Payments for Allotted Amount under non-competitive tender
Table of Multiples of Notes and Payments of Application Amount under non-competitive tender
Tender of Exchange Fund Bills and Notes
Tender Results of Exchange Fund Bills and Notes
Tentative Issuance Schedule for Exchange Fund Bills and Notes
Appointments and Departures
HKMA Pay Review
HKMA Publications
The Hong Kong Mortgage Corporation
Hong Kong Note Printing Limited
Hong Kong Institute for Monetary Research
Exchange Fund Investment Limited
Hong Kong Financial Infrastructure
International Relations
Investment Products Related to Lehman Brothers
Monetary Policy
Notes and Coins
Renminbi business
Credit Card Lending Survey
Monetary Statistics
Residential Mortgage Survey
Year 2000
Guidelines and Circulars


Steering a Steady Course through Choppy Waters


This Monday, I and my colleagues briefed the Panel on Financial Affairs of the Legislative Council on the work of the HKMA and announced the investment performance of the Exchange Fund for the first three quarters of this year.  This has aroused keen media and public interest and discussion over the past few days.  We attach great importance to public opinion, so I would like to provide further information on the investment performance of the Exchange Fund.

The Exchange Fund recorded a loss of HK$63.8 billion in the third quarter this year, representing a negative return of about 1.9%, mainly attributable to a loss in the Hong Kong and overseas equity portfolios and negative currency translation effect.  For the first three quarters, the loss was HK$36.8 billion, representing a negative return of about 1.1%. 

2015 has hitherto been a turbulent year for global investment environment.  Equity and currency markets experienced wild swings, especially in the third quarter.  Let me express them in figures.  Some journalists juxtaposed the Exchange Fund’s third quarter investment performance with major market indices over the same period.  MSCI World Equity Index sank 8.9%, S&P 500 was down 6.9%, and CSI 300 plunged by a staggering 28.4%.  The Hang Seng Index lost 20.6%, marking its worst quarterly fall in terms of points and wiping out almost HK$2 trillion of market capitalisation.  For hedge funds which prided themselves in being able to beat the markets, the HFRX Global Hedge Fund Index registered a negative return of 4.3% in Q3.  The performance of the usually more conservative bond funds fared no better so far this year.  The Barclays Global Aggregate Bond Index recorded a negative return of 2.3% for the first three quarters of the year.

Defend Ourselves in a Highly Unpredictable Market

At the Panel meeting in the Legislative Council this Monday, I said (in Chinese), “In the face of such volatile financial markets, we are powerless….  This is because market forces and adverse investment environment are something beyond our control.  But that does not mean we have been sitting on our hands.  Indeed, we have taken a number of defensive moves to mitigate the Exchange Fund’s loss.  “What we can do is this.  If we are worried about a drop in bond prices because of interest rate hikes, we can hold more cash and shorten the bond duration.  As to a strong US dollar, we can expand investments under the Long-Term Growth Portfolio…” (translation of my response in Chinese to a question by a reporter after the Legislative Council meeting on Monday).

Indeed, in anticipation of a worsening investment environment, we have taken steps to enhance the resilience of the Exchange Fund in several areas.  On asset allocation, we have reduced holdings of long-dated bonds and increased holdings of cash to mitigate the impact of interest rate hikes on our bond portfolio.  We pruned our non-US dollar assets to soften the negative currency translation effect.  We have also quickened the pace of investment diversification.  The approved commitment to new projects under the Long-Term Growth Portfolio, which invests in private equity and real estate, increased substantially to almost US$9 billion in the first ten months of this year from around US$5 billion in 2014.  The Long-Term Growth Portfolio has been performing well, consistently achieving double-digit annualised internal rate of return since its inception in 2009.

It is because of these defensive moves and the conservative and prudent asset allocation strategy of the Exchange Fund that our loss was less severe than “the market” and many investment funds.  I have emphasised many times in the past the Exchange Fund is not an ordinary investment fund.  Its statutory function is to safeguard monetary and financial stability.  However, you can get a feel of how devastating the market conditions were by looking at the performance of other professional investors.  For example, the Mandatory Provident Fund posted a negative return of 9% in the third quarter, with bond funds losing 0.5% and equity funds 11.6%.

Put Short-Term Performance Behind and Brace for Continued Turbulence

We expect the financial markets and investment environment would continue to be turbulent.  The short-term investment performance of the Exchange Fund should not be over emphasised.  Although loss in the third quarter dragged the Exchange Fund’s performance for the first nine months to over HK$30 billion in red, the market regained its footing in October and sentiment has also improved somewhat.  According to preliminary figures as at end October, the Exchange Fund has essentially recovered its loss recorded in the first three quarters.  This notwithstanding, the financial markets are unpredictable and the investment environment remains highly uncertain further down the road.  I cannot emphasise enough – we should take a medium- to long-term perspective when we assess the investment performance of the Exchange Fund, bearing in mind the statutory purposes of the Exchange Fund and the design of its investment strategies.  We will continue to manage the Exchange Fund in a prudent and disciplined manner and avoid engaging in short-term speculation in order not to take on significant risks.


Norman Chan
Chief Executive
Hong Kong Monetary Authority

5 November 2015

Last revision date: 5 November 2015
Tender Invitations
Legislative Council Issues
The HKMA Information Centre
Monetary Stability
Banking Stability
International Financial Centre
Exchange Fund
Annual Report
Half-Yearly Monetary & Financial Stability Report
Quarterly Bulletin
HKMA Background Briefs
Reference Materials
CMU Bond Price Bulletin
Economic & Financial Data for Hong Kong
Monthly Statistical Bulletin
Monetary Statistics
Press Releases
Guidelines & Circulars
Forthcoming Events
Information in Other Languages (Bahasa Indonesia, हिन्दी, नेपाली, ਪੰਜਾਬੀ, Tagalog, ไทย, اردو)
Account Opening
Consumer Corner
Consumer Education Programme
Complaints about Banks
Complaints about SVF Licensees
Internet Banking
Fraudulent Bank Websites, Phishing E-mails and Similar Scams
Be Careful of Bogus Phone Calls and SMS Messages
Authenticate the Callers and Bank Hotline Numbers
Register of AIs & LROs
Register of Securities Staff of AIs
Register of SVF Licensees
Investment Products Related to Lehman Brothers
Photo Gallery