HK's Monetary Stability still Supported by Exchange Fund Despite Losses
[2009-01-26 15:13:22]
The Exchange Fund is still capable of supporting the Hong Kong dollar's exchange value and ensure monetary stability although it posted a record investment loss last year, Hong Kong Monetary Authority (HKMA) Chief Executive Joseph Yam said here on Thursday.
In his weekly Viewpoint column published here on Thursday, Yam, head of Hong Kong's de facto central bank, said an investment loss of 74.9 billion HK dollars (9.66 billion U.S. dollars), or 5.6 percent of the entire investment portfolios, is "not such a terrible result" amid the biggest financial crisis in a century.
Yam noted that the growth in the Exchange Fund's size reflected the fact that the amount of money available for maintaining monetary and financial stability in Hong Kong has increased despite the financial crisis.
"This reflects the inflow of funds into the Hong Kong dollar, which results in an expansion of the Aggregate Balance and the U.S. dollar assets backing it," he said.
However, Yam warned of possible sharp adjustments in the structure of the Exchange Fund's balance sheet.
"A reversal of capital inflows into Hong Kong, for whatever reason, is a possibility although we do not see any reason why this should occur in the near term," he warned, adding "such a reversal would be manifested in a fall in the Aggregate Balance and the corresponding U.S. dollar assets backing it."
Yam expected the performance of global financial markets might also continue to disappoint, a situation that might result in further downward adjustments in the Accumulated Surplus of the Fund.(Xinhua)
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