Hong Kong's Exchange Fund Q3 investment income drops 57% on quarter

Hong Kong

HONG Kong's Exchange Fund, which is used to back the Hong Kong dollar, posted investment income of HK$52.8 billion (S$9.3 billion) in the third quarter, a drop of 56.6 per cent from the previous quarter, the Hong Kong Monetary Authority (HKMA) said on Monday.

The figure compared with an investment gain of HK$23.5 billion in the year-ago period, and a revised HK$121.6 billion investment income in the second quarter in 2020.

For the January-September period, the investment income amounted to HK$62.4 billion, compared with HK$201.9 billion a year earlier.

The fund saw gains on bonds of HK$83.2 billion in the first nine months. However, both Hong Kong equities and foreign exchange recorded losses of HK$19.9 billion and HK$9.7 billion, respectively.

"Hong Kong's financial market and the Linked Exchange Rate System (LERS) continue to operate effectively," HKMA CEO Eddie Yue said during a presentation at the Legislative Council of Hong Kong, and reiterated that the LERS does not need to change. He said the outlook for the fourth quarter is "very uncertain" and "very hard" to foresee, due to Brexit negotiations and the Covid-19 pandemic, which will drag down the global economy in the short term, while the long-term impact can't be ignored.

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The territory's de facto central bank said it will continue to be defensive and put liquidity as one of the top factors in consideration to preserve capital, but urged the public to manage risks. The HKMA is the key manager of the Exchange Fund, which is under the control of the financial secretary and invests in equities, bonds, foreign exchange and other securities and assets. REUTERS