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HK Exchange Fund's Q3 investment income drops; refutes talk of capital control

Hong Kong

HONG KONG'S Exchange Fund, which is used to back the Hong Kong dollar, posted an investment income of HK$20.2 billion (S$3.5 billion) in the third quarter, a drop of 55 per cent from the previous quarter, the Hong Kong Monetary Authority (HKMA) said on Monday.

The figure compared with an investment gain of HK$9.5 billion in the year earlier period, and an HK$33.6 billion investment loss in the fourth quarter of 2018.

"The Hong Kong dollar has been stable, the Linked Exchange Rate System (LERS) will not and does not need to change," HKMA chief executive Eddie Yue said during a presentation at the Legislative Council of Hong Kong, or LegCo. He urged the public not to listen to rumours aimed at spreading unease.

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"Hong Kong will not implement capital and foreign exchange control," Mr Yue said, adding that the HKMA had the commitment and ample resources to maintain the city's monetary and financial stability.

Hong Kong slid into recession for the first time in a decade in the third quarter amid protests against what is seen as Beijing's tightening grip on the Asian financial centre.

Last week, the HKMA cut its key benchmark rates in the city, which is bracing for its first recession since the global financial crisis following months of pro-democracy protests.

Mr Yue reiterated that there has been no noticeable fund outflows from the Hong Kong banking system during the quarter.

The Exchange Fund recorded an investment income of HK$198.6 billion in the January to September period this year. The Fund saw gains on bonds of HK$106.3 billion for the first nine months, a jump of 264 per cent from a year earlier.

However, Hong Kong equities recorded an investment loss of HK$12.3 billion in the third quarter, the second quarterly loss in a row.

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