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Hong Kong’s Exchange Fund incurs third-quarter loss amid market volatility

Exchange Fund
By Hui Ching-hoo   
November 21, 2023

Hong Kong’s Exchange Fund incurred an investment loss of HK$5.5 billion (US$705.1 million) in the third quarter after two consecutive quarterly gains, weighed down by global stock market volatility, particularly in Hong Kong and China.

For the first nine months of the year, the fund posted an investment gain of HK$110.9 billion thanks to gains of HK$108 billion and HK$8.4 billion, respectively, in the first and second quarters, recovering from a record HK$202.4 billion loss for all of 2022.

The Exchange Fund is Hong Kong’s foreign reserves for defending the value of the local dollar, which is kept within a HK$7.75-HK$7.85 range against the US dollar.

The fund is supervised by the Hong Kong Monetary Authority (HKMA), the city’s de facto central bank.

HKMA Chief Executive Officer Eddie Yue reported the investment numbers to the Legislative Council on November 17, in a regularly scheduled presentation to lawmakers.

“If the markets maintain the current trend, I am still expecting the fourth quarter and the full year investment return of the Exchange Fund to be positive,” he said.

According to Yue, the fund will continue to use a “defensive and diversified” approach in the current quarter and next year.

“This is because the markets still face a lot of uncertainties as a result of the global economic downturn and inflation pressures, as well as geopolitical tensions,” he said. “The Exchange Fund is for long-term investment and should not worry over short-term market volatilities.”