Thursday, December 15, 2011

HK Exchange Fund posts biggest quarterly loss in 3 yrs

HONG KONG (Dec 15): Hong Kong's Exchange Fund, which is used to back the Hong Kong dollar, posted a HK$40.8 billion ($5.24 billion) investment loss for the third quarter, the biggest in three years, because of a slump in global equities, the Hong Kong Monetary Authority said.

"The third quarter was a very difficult one for any investor," said HKMA Deputy Chief Executive Eddie Yue on Thursday.

Norman Chan, chief executive of the HKMA, also cautioned that the external environment was becoming more and more uncertain.

"Hong Kong is facing an uncertain macro-economic and financial environment externally, and the risk of an economic downturn will increase in 2012," he told legislators.

But he said the chances of a hard landing for China's economy were limited.

Hong Kong's stock market fell more than 20 percent in the third quarter, and the fund recorded a HK$28.7 billion loss on its Hong Kong equity portfolio.

On non-Hong Kong equities, the Exchange Fund reported a HK$37.5 billion loss and foreign exchange losses totalled HK$20.1 billion.

But the fund's investments in bonds made a profit of HK$46.2 billion, mitigating total quarterly losses to HK$40.8 billion, the biggest after a HK$48.3 billion loss recorded in the third quarter of 2008.

For the first nine months, the Hong Kong Exchange Fund's investment income fell to HK$5.6 billion from HK$46.4 billion in the first half. ($1 = 7.7823 Hong Kong dollars). - Reuters

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