Exchange Fund Reports Satisfactory Results in a Historic Year

The Hong Kong Monetary Authority (HKMA) today announced the audited results of the Exchange Fund at end-1997 with total assets up 19% to HK$636.6 billion and a 10% growth in accumulated surplus (1996: 8%).

"Growth in the accumulated surplus is a reflection of the performance of HKMA's steady management of the Exchange Fund. The 10% increase in a year of volatility and the most serious financial crisis in Asia can be considered satisfactory under difficult conditions", said an HKMA spokesman.

The HKMA has continued to undertake a prudent approach and adopted largely a defensive bond and currency strategy in the first half of last year as markets were volatile. In the second half of 1997, the HKMA extended the duration of the bond holdings as markets improved.

The strategy was successful in producing a steady and low volatility return. Outlook for 1998 remains uncertain as volatilities in the OECD equity and bond markets are expected to increase while the outlook for US interest rates is mixed.

"The HKMA will continue with its prudent management of the Exchange Fund in 1998 to achieve consistent returns and high liquidity with minimum volatility, in full compliance with the guidelines set down by Exchange Fund Advisory Committee", said the spokesman.

Hong Kong Monetary Authority

31 March 1998