Exchange Fund posts $46.3bn income during the first half

The fund rakes in $43.6bn net investment income amidst the asset markets’ volatility in the first half of the year.

The Exchange Fund recorded an investment income of $46.3 billion in the first half of the year, the Monetary Authority announced on Thursday.

The main components were a total return from bonds of $14.5 billion; an exchange valuation gain of $22.2 billion, mainly as a result of the appreciation of other currencies against the US dollar; a valuation loss, net of dividends, on Hong Kong equities amounting to $1 billion; a valuation gain on, and dividends from, other equities amounting to $9.5 billion; and, a valuation gain on other investments amounting to $1.1 billion.

After deducting interest and other expenses, the net investment income was $43.6 billion. The fee payments to the Fiscal Reserves amounted to $18.3 billion. The fee payments to placements by Government funds and statutory bodies amounted to $2.4 billion. The accumulated surplus recorded an increase of $21.2 billion.

The Abridged Balance Sheet shows the total assets of the Exchange Fund stood at $2.4332 trillion at the end of June, an increase of $88.2 billion compared with the end of 2010.

Monetary Authority Chief Executive Norman Chan said the asset markets were volatile in the first half of the year.

“The global equity markets have been affected since May by the deterioration of Greece’s sovereign debt crisis. Investors’ risk-aversion sentiment heightened, resulting in marked declines in the global equity markets, almost offsetting the gains since the beginning of the year,” he said.

“The markets only stabilised towards the end of June, with a significant rebound in the last week of the month. The Hong Kong equity market underperformed the global markets in the second quarter, wiping out the gains recorded in the first quarter. With the gains in bond investments and exchange valuation, the Exchange Fund achieved an overall investment income of $46.3 billion in the first half of 2011.”

Mr Chan said the investment environment will remain complicated in the second half of the year.

“Against the backdrop of global economic and financial imbalances, foreign exchange, equity and bond markets are likely to remain volatile, which in turn will affect the investment performance of the Exchange Fund in the second half of the year,” he said.