Exchange Fund Posts Sharp Quarterly Drop In Income

The Exchange Fund has posted a sharp drop in its investment income in the three months ending September from the previous quarter, and officials said the outlook for the rest of the year remains uncertain because of the Covid-19 pandemic and upcoming US presidential election.

The fund, which is used to back the Hong Kong dollar, posted an investment income of HK$52.8 billion in the third quarter, compared with a gain of more than HK$120 billion in the April-to-June quarter.

The Monetary Authority said the latest return was driven by equities investment in other regions and foreign exchange, which amounted to HK$29.9 billion and HK$14.7 billion respectively, but was slightly dragged by a HK$0.3 billion loss in the local stock market.

The fund has now posted two straight quarters of gains after an investment loss of HK$112 billion in the first quarter.

For the first nine months of the year, the fund reported an investment gain of HK$62.4 billion. That's down almost 70 percent from the same period last year.

Looking ahead, the Monetary Authority's chief executive Eddie Yue said the fund's performance in the fourth quarter is still "very uncertain".

"October is okay but [in] November and December the markets will be impacted by a few uncertain factors, including, for example, the outcome of the presidential election in the US, whether the outcome will be contested, whether the contested election result will affected the market confidence in the outlook for the US economy, that's one factor," he said.

"The other factor, of course, is the Covid-19 resurgence in Europe and the US, especially in Europe when you already see several countries are imposing new lockdown measures in the last few days. How this will affect the economy and the underlying earnings of the companies will be another factor for consideration."

Yue added that whether a Brexit deal can be reached in the next two months will also have an impact on the market.