Date
17 December 2017
HKMA chief executive Norman Chan (center) says the fall in investment income was largely due to the economic environment and a complicated and unpredictable world financial market. Photo: HKEJ
HKMA chief executive Norman Chan (center) says the fall in investment income was largely due to the economic environment and a complicated and unpredictable world financial market. Photo: HKEJ

Exchange fund posts 46% fall in investment income

The Hong Kong Exchange Fund reported a 46 percent drop in investment income in 2014 to HK$43.6 billion (US$5.6 billion) after recording a foreign-exchange loss, the Hong Kong Monetary Authority (HKMA) said.

Investment income for the fund, set up by the government 17 years ago, fell from HK$81.2 billion in 2013. It had an exchange loss of HK$52.7 billion during the period, according to Bloomberg.

HKMA chief executive Norman Chan said the economic environment and the global financial markets are becoming more complicated and unpredictable as the timing and pace of US interest rate normalization is uncertain.

“The investment environment in 2015 will be even more complex and difficult than 2014,” Chan said.

In a statement, the HKMA said the impact of quantitative easing in Europe and Japan remains to be seen.

The investment return was 1.4 percent, down from 2.7 percent a year earlier.

The fund invests in bonds and stocks denominated in dollar, and other currencies, including the euro, yen, sterling and Hong Kong dollar.

The HK$3.2 trillion fund lowered its holdings of euro and yen last year.

It reported a HK$27.1 billion investment income in 2011, the lowest since a loss in 2008.

Hong Kong set up the exchange fund in 1998 to manage the shares the government bought in August of that year in an unprecedented purchasing spree aimed at hurting speculators, who were betting against the city’s stock market and the local currency’s peg to the U.S. dollar.

Income from bonds was HK$47.3 billion in 2014, versus a loss of HK$19.1 billion, according to the statement. Gains on non-Hong Kong equity investments were HK$33.7 billion from HK$71.8 billion the previous year.

The exchange fund’s average return was 2.8 percent over the last three years and 2.6 percent the last five.

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