Exchange Fund sees record gains

January 29, 2018

Monetary Authority Chief Executive Norman Chan:
The investment income of $252 billion last year is a record high for the Exchange Fund, surpassing the previous record in 2007 by $109 billion.  The overall rate of return of the Exchange Fund was 7.1 %. The performance of the global economy and financial markets last year was much better than expected, and moving into 2018, market optimism continues to prevail despite high valuations. However, the sustainability of the upward momentum of the financial markets will hinge crucially on whether the markets’ optimistic expectations will materialise. It seems that the markets may have under-priced some potential risks including inflation and interest rates may move up faster than expected, negative impact of trade protectionism, and geopolitical factors. If the actual outcomes do not tally with the markets’ expectations, it could easily trigger significant corrections and volatilities in the asset markets. As usual, we will manage the Exchange Fund prudently, monitor market development closely, and deploy some defensive measures as and when appropriate. We will continue to expand our investments under the LTGB (Long-Term Growth Portfolio), with a view to achieving better returns for the Exchange Fund in the medium to long run.

The Exchange Fund recorded its highest-ever investment income of $252 billion last year, with an investment return of 7.1%, the Monetary Authority announced today.

Fees on placements by fiscal reserves amounted to $23.5 billion, while fee payments on placements by government funds and statutory bodies came in at $8.6 billion. The fund’s accumulated surplus increased by $168.4 billion.

Total assets stood at $4.02 trillion at the end of 2017, up $404.8 billion on the previous year.

Monetary Authority Chief Executive Norman Chan said: "The global economy and financial markets in 2017 performed much better than expected.”

He said market optimism continues to prevail, but with some risk factors including the pace of US interest rate normalisation, US trade policies and protectionism, along with geopolitical tensions.

“We will remain agile and nimble, monitor market developments closely and deploy some defensive measures as and when appropriate.”