The Exchange Fund is the last line of defense for financial stability in the city, Hong Kong’s top central banker said, defending the management of the fund that protects the local currency peg.
The Hong Kong Monetary Authority (HKMA) has to steer the Exchange Fund in a prudent and conservative manner, Norman Chan Tak-lam, chief executive of the city’s de facto central bank, wrote on his blog Monday.
The city needs the strong “fortress walls” and powerful “weaponry” to defend itself if and when it is hit by unforeseeable shocks and crises, he wrote.
Chan’s remarks came in response to public concerns and criticism over the investment performance of the Exchange Fund, the Hong Kong Economic Journal reported Tuesday.
Noting the open characteristics of Hong Kong’s economy and financial market, as well as a series of financial shocks in the past, Chan said it is clearly not appropriate for the Exchange Fund to adopt an overly-aggressive investment approach.
It is also inappropriate to directly compare the Exchange Fund with other investment funds or sovereign wealth funds, Chan noted. Rather, the Exchange Fund should adopt a “capital preservation first, long-term growth next” strategy, the HKMA chief added.
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