A deficit of $11.6 billion was recorded in Hong Kong's Balance of Payments account (at 3.5% of GDP) in the fourth quarter of 2002.

This compared to a deficit of $7.7 billion (at 2.4% of GDP) in the third quarter. Reserve assets correspondingly fell by the same amount in the fourth quarter.

There was a sizeable current account surplus of $46.1 billion (at 13.8% of GDP) in the fourth quarter, larger than that of $40.1 billion (at 12.3% of GDP) in the third.

A net outflow of financial non-reserve assets amounting to $65.5 billion (at 19.6% of GDP) was recorded in the fourth quarter, also larger than that of $62.8 billion (at 19.3% of GDP) in the third.

The enlarged Balance of Payments deficit in the fourth quarter was largely caused by increased net outflow of portfolio investment.

Yet this was partly due to increased holding of overseas debt securities by Hong Kong residents, conceivably in seeking higher return amidst the low interest rate environment.

There was in fact some renewed purchase of local equity securities by overseas investors in the fourth quarter, after the redemption in the third.

Meanwhile, net outflow of direct investment and net outflow of cash settlement due to financial derivatives both dwindled significantly in the fourth quarter.

The current account surplus rose distinctly further in the fourth quarter and helped to cushion Hong Kong's overall Balance of Payments position against the increased net outflow of financial non-reserve assets.

For 2002 as a whole, there was a Balance of Payments deficit of $18.5 billion (at 1.5% of GDP), against a surplus of $36.5 billion (at 2.9% of GDP) in 2001.

The current account recorded a surplus of $46.1 billion in the fourth quarter of 2002, larger than that of $38.9 billion in the fourth quarter of 2001.

The larger current account surplus in the fourth quarter was attributable to a marked increase in the invisible trade surplus, which more than offset a decrease in net inflow of external factor income as well as modest increases in the visible trade deficit and net outflow of current transfers.

In the fourth quarter, reserve assets decreased by $11.6 billion, as against a decrease of $7.7 billion in the third. The reduction in reserve assets was mainly attributable to a decrease in the outstanding amount of repurchase agreements.

In 2002, reserve assets decreased $18.5 billion against an increase of $36.5 billion in 2001.

Change in reserve assets in the Balance of Payment account reflects the net change in Hong Kong's foreign currency reserve assets, which come under the management of the Monetary Authority.

Table 1 gives the Balance of Payments account by standard component. Table 2 gives the detailed current account analysed by sub-account component. Table 3 gives the detailed capital and financial account analysed by sub-account component. Table 4 gives the ED statistics by standard component.