Exchange fund yielded $79bln in 2010

The Exchange Fund investment return was 3.6%, according to Monetary Authority Chief Executive Norman Chan.

The Accumulated Surplus recorded an increase of $37.9 billion, and the fee payments to the Fiscal Reserves amounted to $33.8 billion.

The main components were a total return from bonds of $42.1 billion; a valuation gain on, and dividends from, Hong Kong equities amounting to $11.6 billion; a valuation gain on, and dividends from, foreign equities amounting to $27 billion and a valuation gain on other investments amounting to $1.4 billion.

An exchange valuation loss of $3.1 billion was recorded, mainly a result of depreciation of other currencies against the US dollar.

After deducting interest and other expenses, the net investment income in 2010 was $74.4 billion.

The total assets of the Exchange Fund increased by $196.3 billion to $2.3457 trillion at the end of 2010. The increase is mainly attributable to the increase in placements received from fiscal reserves, government funds and statutory bodies.

The 2010 Exchange Fund investment return was 3.6%. The average return was 1.2% over the last three years, 4.9% over the last five and 10 years, and 5.9% since 1994.

Mr Chan said following the speech of the US Federal Reserve Chairman in August to provide additional monetary accommodation if it proves necessary, the global equity market rebounded sharply, leading to a turnaround in the investment performance of the Exchange Fund in the second half of the year.

Regarding the outlook for the year ahead, Mr Chan said the emerging market economies are facing pressure from capital inflow, rising domestic price inflation as well as asset price inflation. These factors will bring significant instability and uncertainty to the macro financial environment and investment markets this year.