HK Exchange Fund loses HK$14.6b
Updated: 2008-04-29 07:22
By Kwong Man-ki(HK Edition)
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In what was by far its worst quarter in seven years, Hong Kong's Exchange Fund booked losses of HK$14.6 billion from January through March amid poor market conditions.
It was also the first time the Exchange Fund booked any losses since the first quarter of 2005, the central bank revealed yesterday.
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Joseph Yam |
The fund is a pool of reserves backing the Hong Kong dollar.
The losses mainly came from Hong Kong and overseas equity investments, which lost HK$30 billion and HK$22.4 billion, respectively. That belittles the gains from foreign-currency exchanges and bonds. Including interest, the income from bonds was HK$25.6 billion, and an exchange gain of HK$12.2 billion was reported.
The global financial markets have experienced a meltdown since the end of last year. The benchmark Hang Seng Index tumbled nearly 4,964 points, or 17.85 percent, in the first three months. In the United States, the Dow Jones Industrial Average lost 7.6 percent, and stocks in Asia-Pacific regions and Europe were also sluggish.
Joseph Yam, chief executive of the Hong Kong Monetary Authority, explained to the Legislative Council's Financial Affairs Panel yesterday that the loss represented less than 1 percent of the total assets of the Exchange Fund.
Earlier this year, when Yam announced the record-high investment returns in 2007, he warned that 2008 would be a "difficult year".
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Hong Kong banks don't need to put a lot of effort into promoting yuan services like they used to. Local yuan deposits have risen sharply in recent months behind the yuan's appreciation and near-zero Hong Kong-dollar deposit rates. Zhang Ting |
But April may be a bright spot thus far, Yam explained, saying that this month's earnings should offset all the first-quarter losses.
Patrick Shum, an executive director at Karl Thompson said: "It's reasonable to expect the fund to recoup the three-month losses in April" if it was able to buy stocks when they bottomed out.
"As the stock markets rebounded sharply in April, some stocks jumped 30 to 40 percent," he said.
Shum explained that, in the first quarter, many funds suffered as the financial markets were volatile; and there was no way for the Exchange Fund to avoid losses.
However, Yam said the fund will not actively buy or sell stocks based simply on their quarterly performances, as "our stock investment is on a long-term basis".
(HK Edition 04/29/2008 page2)