Hong Kong’s Exchange Fund’s investment income plunged 56% year-on-year to HK$34.5 billion (US$4.42 billion) as the war in the Middle East hit stock markets.
The fund, which serves as the city’s foreign reserves to defend the value of the local dollar, incurred a HK$5 billion loss from investments in local equities and lost HK$11 billion on international stocks.
Hong Kong’s benchmark stock index fell 3.3% in the first quarter while the S&P 500 declined 4.6%.
“The Hong Kong stock market experienced significant volatility in the first quarter, following a strong rebound last year, due to geopolitical tensions and fluctuating interest rate expectations,” the Hong Kong Monetary Authority (HKMA), the city’s de facto central bank, says in a statement on May 4. The HKMA manages the Exchange Fund.
The fund’s bond investments gained HK$24.6 billion, down 39% from a year ago.
The HKMA says interest income was eroded as bond prices fell and yields rose because of the conflict in the Middle East. “However, as a core stabiliser of the Exchange Fund, the bond portfolio still maintained a positive return, providing some support to the overall investment portfolio.”
