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Press Releases

Exchange Fund Balance Sheet for end-June published

 

The Hong Kong Monetary Authority (HKMA) today (Tuesday) published the unaudited balance sheet of the Exchange Fund for the end of June 2002 (Annex 1). The balance sheet shows that in the first half of 2002:

  • the Accumulated Surplus of the Exchange Fund increased by HK$11.5 billion, from HK$302.5 billion at the end of December 2001 to HK$314.0 billion at the end of June 2002

  • the foreign exchange assets of the Exchange Fund increased by US$1.2 billion, from US$111.2 billion at the end of December 2001 to US$112.4 billion at the end of June 2002

  • the total assets of the Exchange Fund decreased by HK$3.2 billion, or 0.3%, from HK$979.2 billion at the end of December 2001 to HK$976.0 billion at the end of June 2002.

The Exchange Fund recorded investment income of HK$22.8 billion in the first half of 2002. The main components of this income were (Table 1 of Annex 2):

  • a profit of HK$20.9 billion from bonds and other investments

  • an exchange gain of HK$17.4 billion, mainly due to the appreciation of the euro and the yen against the US dollar

  • a loss of HK$4.6 billion on the Hong Kong equities portfolio

  • a loss of HK$10.9 billion on other equities.

After deducting HK$3.2 billion of interest and other costs and HK$8.1 billion representing the sharing of investment income with the fiscal reserves placed with the Exchange Fund, the Accumulated Surplus registered an increase of HK$11.5 billion.

Commenting on the half-year Exchange Fund Balance Sheet, Mr Joseph Yam, Chief Executive of the HKMA, said that, despite continued volatility in the Hong Kong equity market and difficult global market conditions, the Exchange Fund earned a reasonable investment income in the first half of 2002. "While the weak US dollar contributed to substantial exchange gains and a reasonable return continued to be earned from the bond markets, these gains were partly cancelled out by losses in the equity markets," said Mr Yam.

"The investment return of 2.4% for the first half of 2002 is higher than the rate of return of the investment benchmark determined by the Financial Secretary with the advice of the Exchange Fund Advisory Committee," Mr Yam added. Taking a longer view, the sound performance of the Exchange Fund is reflected in the compounded 6.4% annual investment return achieved for the eight-and-a-half-year period from January 1994 to June 2002, compared with an average annual inflation rate of 1.9% computed up to May 2002 (Table 3 of Annex 2).

"The valuation of the assets in the Exchange Fund goes up and down, reflecting volatility in the financial markets in which we have investments. Notwithstanding short-term market fluctuations, the management of the Exchange Fund, in which the fiscal reserves are deposited, is organised so as to ensure that the Fund is at all times able to meet liquidity requirements," Mr Yam added.

Looking towards the second half of year 2002, Mr Yam said that the global investment outlook continued to be clouded by uncertainties resulting from a number of factors, such as the sustainability of the global economic recovery currently underway and the erosion of general confidence caused by recent cases of deficiencies in audited financial statements in the US. "The HKMA will continue its prudent management of the Exchange Fund to achieve a balance in terms of return, risk and liquidity, in compliance with the guidelines set by the Exchange Fund Advisory Committee," added Mr Yam.

An accompanying Statement of Valuation of the Hong Kong Equity Portfolio is published (Annex 3), showing that the market value of the equity investments of the Portfolio at the end of June 2002 amounted to HK$71.6 billion.

Attachments

Annex 1: Exchange Fund Balance Sheet

Annex 2: Supplementary Figures

Annex 3: Statement of Valuation of the Hong Kong Equity Portfolio

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
16 July 2002

Last revision date: 1 August 2011
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