Hong Kong ‘s wealth fund ensure the stability of the HK currency suffered a HK$86.1 billion i.e. US$11 billion loss in the first quarter. Its biggest ever, as stocks tumbled globally. The HK$4 trillion fund acts as a backstop to ensure the stability of Hong Kong’s currency and as a stabilizer in times of crisis.
According to a presentation by HKMA Deputy Chief Executive Howard Lee to lawmakers Monday the Exchange Fund managed by the Hong Kong Monetary Authority since 1998 lost about HK$111.5 billion on its portfolio of domestic and foreign stocks while bonds gained HK$54.4 billion in the quarter. As Lee said – “We shouldn’t read much into the short term gains or losses, instead we should look at the long-term returns. The outlook is difficult given the pandemic, pace of economic recovery and trade tensions”.
The HK$4 trillion fund acts as a backstop to ensure the stability of Hong Kong’s currency and as a stabilizer in times of the crisis. It joins the other funds around the world in posting losses at the start of the year as markets tumbled because of the coronavirus pandemic situation. The MSCI global stock index slumped about 22 percent in the first 3 months of the year. Hong Kong’s economy badly hit suffered by twin blows from the corona virus and anti government protests that started last year. Now with pandemic under control with several days of no new cases reported over the past two weeks for which the city is again facing fresh political unrest.
And so also at that same time the city has tapped its currency reserves to ease pressure on the Hong Kong dollar, which has been trading at the strong end of a band against its US counterpart. . Chief Executive Eddie Yue said in the same briefing that the HKMA has been gradually lowering the fund’s assets in currencies other than the Hong Kong and US dollars. Now they constitute less than 10 percent of fund’s assets. It invests in private equity and real estate. It returned an overall 6.6 percent last year.