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HKD123.6bn Surplus In Hong Kong Last Year

by Mary Swire, for LawAndTax-News.com, Hong Kong

14 July 2008

Government revenue in Hong Kong amounted to HKD358.4bn, while it spent HKD234.8bn in 2007-08, resulting in a HKD123.6bn surplus, the country's Financial Services and the Treasury Bureau announced on Friday.

The surplus brought the fiscal reserves to USD492.9bn at 31st March.

The Bureau said the final results for 2007-08, gazetted last week, were the same as the provisional results published on April 30.

Also last week, Hong Kong Monetary Authority Chief Executive, Joseph Yam argued that the Exchange Fund's investment performance should be judged over the longer term.

In his Viewpoint column published on Thursday, he argued that despite the unusually rough period that global financial markets are experiencing, the fund's conservative investment approach has helped keep losses to a minimum.

The longer-term approach to the fund's investment return is reflected in the revised income-sharing arrangement between the fund and the fiscal reserves the Government placed with it introduced in April last year, he explained.

Under the arrangement, the fund pays a fee to the fiscal reserves based on the six-year moving average of the investment return of the fund's investment portfolio.

The Government's investment income from the fiscal reserves in 2008 will therefore not be immediately affected by the fund's performance during the year, Yam stated.

The system spreads out the effects of good and not-so-good years, making the Government's income from fiscal reserves more stable and predictable.

"We have to take the rough with the smooth and should not be surprised by short-term losses at times of high market volatility and uncertainty. The important thing is the long-term performance of the fund and its ability to fulfil its primary purpose," Mr Yam continued, concluding:

"We are finalising the preliminary half-year accounts of the Exchange Fund, and will, as usual, publish them as soon as they are available."

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