20 January 2019
Norman Chan is seeing his popularity plummet as a result of the poor performance of the Exchange Fund last year. Photo: HKEJ
Norman Chan is seeing his popularity plummet as a result of the poor performance of the Exchange Fund last year. Photo: HKEJ

How did Norman Chan manage to sleep these past six months?

Norman Chan’s prospects of becoming Hong Kong’s next chief executive have grown dimmer since he delivered a lackluster report card on the Exchange Fund last week.

But whether he is doing a good job remains a valid question.

Just last year, Chan renewed his contract as chief executive of the Hong Kong Monetary Authority (HKMA) for another five years.

That makes him one of a handful of people fancied to contend for the top job in 2017.

In fact, Chan has always been seen as an undeclared candidate given his impeccable record of public service and his commercial and financial track record.

His commercial value was validated when it was revealed that Sun Hung Kai Properties once considered hiring him for HK$16 million a year 10 years ago before choosing Rafael Hui.

The revelation was one of the highlights of Hui’s corruption trial last year which ended in a jail sentence for the former Hong Kong chief secretary and co-accused Thomas Kwok, co-chairman of Sun Hung Kai.

Had Chan joined the property group, his compensation would not have been less than the HK$50 million (US$6.45 million) consultant fee Leung Chun-ying received from an Australian company three years ago before the latter became Hong Kong chief executive.

When Chan announced the HK$3 trillion Exchange Fund had recorded a measly 1.4 per cent return last year due to foreign exchange losses of HK$52.7 billion, he turned from dark horse to also-ran in the race to succeed Leung.

Could he not have foreseen that it was going to be a tough year for certain major currencies because of the strong US dollar?

Losses in the euro, yen and other currencies contributed to a currency loss of HK$28.4 billion in the third quarter and HK$24.7 billion in the fourth quarter. Didn’t he see these coming? 

It’s no coincidence that Chan has presided over two of the worst four years of the Exchange Fund. In 2011, the fund delivered a 1.1 per cent return, the third worst in its history.

The worst years were 2008 (minus 5.7 percent) and 2001 (0.7 percent), both under the watch of his predecessor, Joseph Yam. But those years were marred by a financial tsunami and the dotcom bust.

With a salary of HK$9.1 million in 2013, Chan will be hard pressed to justify his pay in relation to his performance.

Private fund managers, for instance, flirt with dismissal if they had anything worse than a 1.4 percent return. The Mandatory Provident Fund does better than that.

In 2013, Chan produced a 2.7 per cent return, almost double that in 2014, just before his contract renewal

Chan’s poor performance will hurt government spending. The Exchange Fund contributed HK$27.5 billion to the public coffers last year, sharply down from HK$36.8 billion in 2013.

Among the hardest hit are the Housing Authority, which placed HK$36 billion with the Exchange Fund, followed by Research Endowment (HK$26 billion) and Community Care Fund (HK$16 billion), according to the 2013 HKMA annual report.

West Kowloon Cultural District Authority increased its placement to HK$14.4 billion from HK$11.7 billion in 2013 and enjoyed a rolling average return rate of close to 6 per cent before the poor investment return.

Low popularity

Apart from the poor investment performance, high property prices are also hurting Chan’s popularity. 

He is not to blame for soaring housing prices but people who missed a chance to buy a home somehow hold him responsible for advising them against going into the property market.

Now they are stuck with rising rents while watching homeowners get rich. 

Whenever there were signs of a growing property bubble, Chan would say the HKMA could ease stamp duty to avoid a dramatic fall in home prices and stabilize the financial market.

Did he think of those who expected him to announce more tightening measures?

In May, Chan faced a public relations disaster when he described “starter homes” as those below HK$6 million.

It is true that most private apartments in the 500 square foot range in Kowloon are priced above HK$5 million, but why even mention the price if he had no solution to make these flats more affordable?

The public in general likes to hear good news, rather than repeated warnings about financial risk and economic downside.

In December, Financial Secretary John Tsang said the Hong Kong government is likely to record surpluses in the coming three years, implying more money for public services.

For his part, Chan warned that the investment environment this year will be even more complex and difficult than in 2014, repeating an old refrain.

We hope Chan will be on his toes this time — and luckier in the Year of the Goat. 

– Contact us at [email protected]


EJ Insight writer

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