Assets in the Exchange Fund shrank by HK$48 billion, or 4.7 per cent, in the first half of the year, due largely to the unwinding of Y2K-related contingency arrangements, according to the Hong Kong Monetary Authority.
The Exchange Fund, which backs the Hong Kong dollar and is managed by the authority, stood at HK$966.4 billion as of June 30, down from HK$1.01 trillion recorded at the end of last year.
About 60 per cent of the fund's drop, or HK$28.7 billion, was due to the reversing of contingencies made in anticipation of millennium-related computer problems.
Bank notes worth HK$22.1 billion were withdrawn from circulation, and extra liquidity worth HK$6.6 billion was withdrawn from banks' clearing accounts with the authority.
The rest of the decline was due to a reduction in holdings belonging to other statutory bodies, payment of bank borrowings and a drop in the value of the fund's equity portfolio.
Placements by other statutory bodies and the fund's bank borrowings declined by HK$16.1 billion.
