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Press Releases

Half-Year Exchange Fund Results 2006

The Hong Kong Monetary Authority (HKMA) today (Thursday) published the investment results of the Exchange Fund for the first half of 2006 (Annex 1) and the unaudited balance sheet of the Exchange Fund for the end of June 2006 (Annex 2).

The HKMA earned for the Exchange Fund an investment income of HK$30.7 billion in the first half of 2006. This is 167% more than that earned in the first half of 2005. The main components of this investment income are:

  • a gain of HK$10.7 billion on the Hong Kong equities portfolio
  • a gain of HK$3.5 billion on other equities
  • an exchange gain of HK$12.3 billion from the appreciation of foreign currencies against the US dollar
  • a gain of HK$4.2 billion from bonds and other investments.

Interest and other costs of HK$5.0 billion were incurred in the first half of 2006, predominantly in the form of interest paid on the Exchange Fund paper issued. The share of investment income for the fiscal reserves placed with the Exchange Fund was HK$8.7 billion in the first half of the year. After deducting these two items from investment and other income1, the Accumulated Surplus of the Exchange Fund recorded an increase of HK$17.1 billion in the first half of 2006.

The unaudited balance sheet shows total assets of the Exchange Fund at HK$1,105.2 billion at the end of June 2006, an increase of 3.6% or HK$38.4 billion compared with the corresponding figure for the end of 2005. Over 90% of the Exchange Fund is held in foreign currency assets.

Commenting on the half year results, Mr Joseph Yam, Chief Executive of the HKMA, stressed that the Exchange Fund had clear statutory purposes centring on the maintenance of monetary and financial stability, and should therefore not be regarded as purely an investment fund. He recalled the sharp volatility seen in international financial markets and therefore the possibility of large month-to-month or even day-to-day fluctuations in the investment results of the Exchange Fund. "It is nevertheless encouraging that, against such a challenging investment climate, the HKMA has been able to earn an investment income of HK$30.7 billion for the Exchange Fund in the first half of the year," Mr Yam said.

Looking ahead, Mr Yam said that anxieties about rising inflation amid slowing economic activity in the US had clouded the interest rate outlook, and concerns about a tightening of global liquidity and rising geopolitical tension had also increased uncertainties in the equity, bond and currency markets. "The volatility in international financial markets is likely to continue and may possibly intensify, but the HKMA will continue to manage the Exchange Fund in a prudent manner under the guidance of the Exchange Fund Advisory Committee," Mr Yam said.

Attachments

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

For further enquiries, please contact:
Sara Yip, Manager (Press), at 2878 8246 or
Ying-ying Cheng, Manager (Press), at 2878 1687

1 Other income, which consists mainly of bank licence fees, is HK$0.1 billion.

Hong Kong Monetary Authority
27 July 2006

Last revision date: 1 August 2011
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