HK Exchange Fund records second highest investment return in 2009

<?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Hong Kong's Exchange Fund recorded an investment income of 106.7 billion HK dollars (13.7 billion U.S. dollars) in 2009, the second highest on record, the Hong Kong Monetary Authority announced Thursday.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

The total assets of the Exchange Fund increased by 591.4 billion HK dollars (75.8 billion U.S. dollars) to 2,151.7 billion HK dollars (275.9 billion U.S. dollars) at the end of 2009 from a year earlier, mainly due to capital inflows to the HK dollar, the Monetary Authority said.

The full-year investment return was 5.9 percent, it said.

The investment income comprises 48.9 billion HK dollars of gain on Hong Kong equities, and 48.7 billion HK dollars from other equities, among others.

There was also an exchange valuation gain of 9.8 billion HK dollars thanks to the appreciation of other currencies against the Hong Kong dollar, which was partly offset by a valuation loss of 0. 7 billion HK dollars on bonds and other investments.

The net investment income, after deducting interest and other expenses, was 103.2 billion HK dollars (13.2 billion U.S. dollars).

The average investment returns of the Exchange Fund was, respectively, 3.8 percent over the last three years, 5 percent over the past decade and 6.1 percent since 1994.

Norman Chan, Chief Executive of the Monetary Authority, said the investment environment last year was extremely uncertain and volatile, with the major equity markets under pressure in the first quarter but starting to recover from the second.

"U.S. bond yields saw a sharp rise during the year, especially at the long end, with concerns over the supply of U.S. government bonds and uncertainties about the timing and pace of the exit from monetary easing," he added.

Chan said prospects for the global financial markets were far from certain.

"I expect that the uncertainties surrounding the movements of interest rates, international fund flows and exchange rates may lead to considerable volatility in global asset markets in 2010," he said.