Exchange Fund sees 38 bln HKD investment gain

The Exchange Fund achieved an investment income of 38.1 billion HK dollars (4.9 billion U.S. dollars) in the first half of this year, the Hong Kong Monetary Authority announced Thursday.

The income was derived from a total return from bonds of 19.8 billion HK dollars; Hong Kong equities of 9.6 billion HK dollars; other equities of 17.9 billion HK dollars; an exchange valuation loss of 10.4 billion HK dollars, mainly a result of depreciation of other currencies against the U.S. dollar, and other investments of 1.2 billion HK dollars.

After deducting interest and other expenses, net investment income was 35.9 billion HK dollars.

Monetary Authority Chief Executive Norman Chan said as the European Central Bank's longer-term re-financing operations introduced at the end of 2011 relieved the liquidity squeeze European banks faced, and the U.S. economic data were better than expected and major equity markets around the world rebounded markedly in the first quarter.

"However, market conditions changed in the second quarter. Greece's failure to form a coalition government after the May election dealt a significant blow to investors' confidence, and this also affected market confidence in other countries in the eurozone, in particular Spain and Italy," Chan said.

Chan said there will be great uncertainties and risks in the investment environment and sentiment of the global financial markets in the second half of the year. He added the authority would continue to manage the Exchange Fund prudently and pursue investment diversification in a gradual and orderly manner, with a view to providing a relatively stable long-term return for the fund. (1 U.S. dollar is equivalent to 7.76 HK dollars)