The Hong Kong Monetary Authority (HKMA) announced today (17
January) the operating results* of the Exchange Fund for
the year 2001.
The Exchange Fund recorded a positive investment income of
HK$7.0 billion in 2001. The main components of this income were (Annex
1):
- a profit of HK$50.4 billion from bonds and other
investments;
- a loss of HK$27.1 billion on the Hong Kong equities
portfolio;
- a loss of HK$3.2 billion on other equities; and
- an exchange loss of HK$13.1 billion, as a result of the
depreciation of the euro and the yen against the US dollar.
Commenting on the operating results of the year, Mr Joseph Yam,
Chief Executive of the HKMA, said that 2001 had been an especially
difficult and troubled year for the world's financial markets. "The
events of 11 September and their aftermath added pressures and
uncertainties to an already slowing global economy. The Exchange
Fund continued to make very high gains in the bond markets. But
these gains were to a great extent cancelled out by losses on the
Hong Kong equities portfolio and exchange losses on the euro and
the yen. Despite the volatility in the markets, the Exchange Fund
produced a positive, albeit modest, investment return. This
investment return achieved in 2001 was substantially higher than
the return on the investment benchmark (0.4% return on the
investment benchmark return vs. 0.7% actual return on the Exchange
Fund)."
Although direct comparisons are not always easy or appropriate,
generally speaking, the Exchange Fund achieved an investment return
more favourable than those of other similar funds in the private
sector, which range from -0.1% to -6.1% (Annex 2).
The performance of the Exchange Fund should be viewed against a
backdrop of a compounded 6.5% annual investment return achieved for
the 8 year period from 1994 to 2001 (Chart
1).
Owing mainly to the net drawdowns of the fiscal reserves
amounting to HK$36.6 billion, the Abridged Balance Sheet (Annex 3)
shows that in the year 2001, the total assets of the Exchange Fund
decreased by HK$42.8 billion, from HK$1,023.4 billion at the end of
December 2000 to HK$980.6 billion at the end of December 2001.
After deducting interest and other costs, and the sharing of
investment income with the fiscal reserves placed with the Exchange
Fund, the Accumulated Surplus registered a decline of HK$4.4
billion (Annex 4).
"Despite this slight decline in 2001, the Accumulated Surplus
had more than doubled in value over the past seven years. There are
abundant resources in the Exchange Fund to meet its primary
objectives of safeguarding the exchange value of the Hong Kong
dollar and maintaining the stability and integrity of Hong Kong's
monetary and financial systems," Mr Yam added.
Looking towards the year 2002, Mr Yam said that the investment
outlook remained uncertain and difficult. "It is too early to
forecast the likely path of the anticipated economic recovery. The
actual timing, magnitude and sustainability of the recovery of the
global economy may differ from what is currently expected by the
financial markets. Understandably, the financial markets are very
nervous and we expect volatile conditions to continue for some time
to come," he said. "The HKMA will maintain its vigilance of
changing market conditions, and will continue, under the guidance
of the Exchange Fund Advisory Committee, to manage the Exchange
Fund in a prudent manner," Mr Yam added.
An accompanying Statement of Valuation of the Hong Kong Equity
Portfolio is published (Annex 5), showing that the market value of the
equity investments of the Portfolio at the end of December 2001
amounted to HK$85.9 billion.
*Unaudited figures for
2001
Attachments
Annex 1:
Exchange Fund Performance
Annex
2: Supplementary Figures
Annex 3:
Exchange Fund - Abridged Balance Sheet as at 31 December
2001
Annex 4:
Exchange Fund - Change in Accumulated Surplus
Annex 5:
Statement of Valuation of the Hong Kong Equity Portfolio
Chart
1: History of Investment Return of Exchange Fund (1994 to
2001)
PowerPoint Presentation
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
17 January 2002
