Exchange Fund Results for the Year 1999

The Hong Kong Monetary Authority (HKMA) today announced the operating results of the Exchange Fund for the year 1999.

As at the end of December 1999, the Exchange Fund had HK$1,014.4 billion of assets, representing an increase of 10.1% over a year ago. During the year, the accumulated surplus of the Exchange Fund grew by 20.2% from HK$242.3 billion at the end of December 1998 to HK$291.3 billion at the end of December 1999.

Total investment income of the Exchange Fund was HK$104.8 billion, which is an increase of 11.2% over a year ago and reflects high returns on the Hong Kong equity portfolio in 1999. Profits for the year, after deducting for the interest payable on fiscal reserves placed with the Exchange Fund and other expenses, was $49.0 billion, compared to $52.2 billion reported last year.

Commenting on the operating results of the Exchange Fund for 1999, the Chief Executive of the HKMA, Mr Joseph Yam, said that the 20% increase in accumulated surplus was encouraging, particularly in a very difficult year when rising interest rates resulted in volatile financial conditions.

Mr Yam cautions that financial markets in 2000 will be even more difficult. "The momentum behind inflationary expectations appears to be building as the continuing strength in the US economy is accompanied by cyclical recovery elsewhere in the world. Uncertainties over the magnitude of interest rate rises will contribute to increased volatility in bond and equity markets. The investment performance of the Exchange Fund in 2000 will no doubt be affected; but the HKMA will remain vigilant to changing market conditions in its prudent management of the Exchange Fund."

Attachment

Annex A: Exchange Fund - Income and Expenditure Account for the year ended 31 December 1999

Annex B: Exchange Fund - Balance Sheet as at 31 December 1999

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

PowerPoint presentation

Hong Kong Monetary Authority

28 March 2000