Hong Kong's Exchange Fund Turns A Profit Again

by Mary Swire, Tax-News.com, Hong Kong

07 May 2002

Hong Kong Monetary Authority chief executive Joseph Yam Chi-kwong addressed Legco yesterday, reporting on the performance of the SAR's Exchange Fund, which earned $9.3 billion in the first four months of the year from the stock and bond markets as well as from foreign exchange. The fund, which stood at $977.9 billion at the end of April, is used to defend the Hong Kong dollar.

The Government will receive $3.2 billion in investment returns from the Exchange Fund for the period. Last year the Government received $1.6 billion, compared with $18.1 billion in 2000 and $45.4 billion in 1999.

HKMA said the return was due to a stronger stock market last month. "The investment environment continues to be very volatile but the stock market turned better in April," Mr Yam told legislators.

Mr Yam said the Government expected to sell $28.5 billion worth of its shares via the Tracker Fund this year, completing the planned sale of the stock in its portfolio. It plans to keep $48.9 billion worth of shares as a long-term investment.

In 1998, the Government spent $118 billion to buy Hang Seng Index stocks to support the market during the Asian economic crisis. It was much criticised at the time, but the operation was a big success, and the Government has since been selling the shares via the Tracker Fund, raising $149.8 billion so far.

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