Hong Kong’s Exchange Fund posts record 9-month gain of US$28.8 billion as markets rallied

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Lawmakers asked whether the fund could give more to address the government’s deficit, but HKMA’s CEO urged sticking with an existing formula

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Enoch Yiu

Published: 11:05am, 4 Nov 2024Updated: 5:36pm, 4 Nov 2024

The Exchange Fund reported one of its best quarterly returns as stock markets rallied in Hong Kong and the United States, as a diversified investment approach helped to swell the financial war chest for defending the city’s currency peg.

The fund’s investment return more than doubled to HK$224.7 billion (US$28.8 billion) in the first nine months of this year, making it the best return on record, according to the Hong Kong Monetary Authority (HKMA). The fund earned HK$114.6 billion during the quarter ended in September, a turnaround from a loss of HK$10.5 billion in the same period last year.

“With improved market sentiments, we hope we can continue the momentum and achieve positive returns for the Exchange Fund in the fourth quarter,” the HKMA’s chief executive Eddie Yue Wai-man told lawmakers in panel of the city’s Legislative Council.

Several lawmakers asked whether the Exchange Fund could share more of its investment returns with the government to address its deficit problem. The Exchange Fund paid HK$10 billion in the first nine months to the government fiscal reserve, lower than HK$14 billion it paid in the same period a year ago.

The government’s budget deficit stood at HK$183.9 billion in the first five months of the current financial year beginning in April, according to government data.

“The Exchange Fund delivered its payment to the government based on a formula of the average return of the past six years of investment returns,” Yue said. “This works well as it will give a more stable annual payment to the government instead of ups and downs every year due to the volatile performance of the Exchange Fund.”