Hong Kong’s first quarter exchange fund yields $24.2bn

Monetary Authority said Hong Kong’s interest-rate cycle and capital flow will be affected by the US’ quantitative easing policy.

Hong Kong's Exchange Fund investment yielded $24.2 billion in the first quarter, Monetary Authority Chief Executive Norman Chan announced on Monday.

The main components were an exchange valuation gain of $14.5 billion, a valuation gain and dividends from Hong Kong equities amounting to $3.5 billion, a valuation gain and dividends from foreign equities amounting to $8.9 billion and a valuation gain on other investments amounting to $200 million. A $2.9 billion loss from bonds was recorded in the period.

Mr Chan said Hong Kong’s interest-rate cycle and capital flow will be affected by the US’ quantitative easing policy and the country’s timetable to hike interest rates. Borrowers should manage interest-rate risks properly and avoid over-borrowing.

Expressing his concern over the recent property price hike, he said new mortgage loans approved and new applications in April fell more than 30%. The authority will monitor market developments and, if necessary, introduce more measures to strengthen banks’ risk management in mortgage lending.

Total loans the banking sector extended in Hong Kong continued to grow rapidly in the first quarter. Mr Chan said the authority is concerned about the development and has written to banks requiring them to assess their business plans and funding strategies and submit relevant information to the authority. It is reviewing the relevant information and, if necessary, will take follow-up actions.