China Fund News reporter Ye Shijie
html On May 6, at the meeting of the Financial Affairs Committee of the Hong Kong Legislative Council, the Hong Kong Monetary Authority (HKMA) disclosed the first quarter investment briefing of the Hong Kong Exchange Fund. The briefing shows that excluding valuation changes in the long-term portfolio, the Exchange Fund recorded investment income of HK$54.3 billion in the first quarter of this year, recording net investment income for two consecutive quarters.Hong Kong Monetary Authority President Yu Weiman said that mainland China's economy has rebounded and Hong Kong's economy continues to recover, but investment prospects are still affected by uncertain factors such as the geopolitical situation. However, he emphasized that Hong Kong's financial system is highly resilient to earthquakes, with ample capital and liquidity buffers, and market operations will remain smooth.
The Exchange Fund recorded a net income of HK$54.3 billion in the first quarter of 2024
Documents released by the Hong Kong Monetary Authority show that the Exchange Fund’s investment income in the first quarter was HK$54.3 billion.
Specifically, in the first quarter of 2024, Hong Kong’s Exchange Fund bond investment income was HK$25.1 billion, a quarter-to-quarter decrease of 64.6%; other stock investment income was HK$36.3 billion, a quarter-to-quarter increase of 9.7%; Hong Kong stock investment losses shrank to 2.3 billion quarter-on-quarter. Hong Kong dollar; foreign exchange valuation loss of non-Hong Kong dollar assets was HK$4.8 billion. This data does not include valuation changes in the long-term portfolio.
(Source: Hong Kong Monetary Authority Briefing)
It is worth noting that although the Exchange Fund recorded more than HK$50 billion in investment income in the first quarter of 2024, it was compared with the HK$108 billion investment income recorded in the first quarter of last year and the fourth quarter of last year. Compared with the quarterly investment income of HK$120.1 billion, there is still a certain gap.
The website of the Hong Kong Monetary Authority shows that the statutory purpose of the Exchange Fund is stipulated in the Exchange Fund Ordinance, and it is mainly used to directly or indirectly affect the exchange rate of the Hong Kong dollar. Subsequently, the Exchange Fund (Amendment) Ordinance passed in 1992 expanded its functions and stated that its main purpose is to maintain the stability and soundness of Hong Kong's monetary and financial system so as to maintain Hong Kong's status as an international financial center. Over the past few decades, the Exchange Fund has played an extremely important role every time Hong Kong experienced banking instability or financial crisis.
The investment objectives of the Hong Kong Exchange Fund include: protecting capital, ensuring that the overall monetary base is fully supported by highly liquid US dollar assets at all times, ensuring that liquidity is sufficient to maintain monetary and financial stability; and when the above three conditions are met Try to achieve investment returns as much as possible to protect the long-term purchasing power of the fund.
In addition, the Hong Kong Monetary Authority also revised the Exchange Fund’s investment income in 2023 to HK$226 billion in a briefing, an increase from the previously announced HK$212.7 billion.
Hong Kong Monetary Authority President Yu Weiman:
The Exchange Fund will continue to maintain defensive measures to ensure sufficient liquidity
Regarding the investment status of the Exchange Fund, Hong Kong Monetary Authority President Yue Weiman said that the overall investment status of the Hong Kong Exchange Fund in the first quarter of this year was good. However, looking forward to the second quarter, given that there are still many uncertainties in the market outlook, the Exchange Fund continues to maintain defensive measures and ensure sufficient liquidity.
Yu Weiwen pointed out that the future performance of the capital market depends on three factors, namely, the U.S. economic and inflation data, which will affect the pace of interest rate adjustment by the Federal Reserve; geopolitical tensions may increase commodity prices, leading to increased global inflationary pressure; the economic recovery of Hong Kong and the Mainland Momentum will affect the price performance of assets in the region.
Yu Weiwen also revealed that since capital market trends also have an impact on MPF investment returns, the Hong Kong Monetary Authority has studied and discussed with the Provident Fund Authority (mpfa) and decided that when the Hong Kong government issues bonds in the future, MPF investment managers will be given priority in subscribing , hoping to provide more assets with stable returns for the MPF market, and more measures will be launched in the future.
Yu Weiwen also mentioned at the meeting that under the linked exchange rate system, Hong Kong has no room to proactively adjust interest rates, otherwise it will cause capital flows and affect exchange rate stability. He emphasized that the Exchange Fund investment mainly plays a reserve role to safeguard monetary and financial stability.
(Source: Hong Kong Monetary Authority Briefing)
