Hong Kong’s Exchange Fund suffered record losses of HK$86.1 billion ($11.1 billion) in the first quarter of 2020 on the back of large global stock market falls in the wake of the coronavirus outbreak.
The exchange fund is the main investment arm and a de-facto sovereign wealth fund of the Hong Kong Monetary Authority.
At the moment, there remains a lot of uncertainty looming ahead. The markets will continue to be burdened by a possible shortage of dollars and mounting corporate default risks
Eddie Yue Wai-man,
HKMA chief executive
These recent large losses come after the Exchange Fund posted gains of HK$60.3 billion in the final quarter of last year and generated its second highest annual investment income at a record amount of HK$262.2 billion in 2019.
The fund reported a record return of HK$133.4 billion last year. The results reported on Monday are the first quarterly losses reported by the fund since the fourth quarter of 2018 when it lost HK$33.6 billion.
“The coronavirus pandemic, together with the crash in oil prices, has sent jitters across stock markets worldwide,” Eddie Yue Wai-man, HKMA chief executive, told lawmakers at a regular briefing on Monday.
“At the moment, there remains a lot of uncertainty looming ahead. The markets will continue to be burdened by a possible shortage of dollars and mounting corporate default risks,” Yue warned.
The losses, which came mainly from overseas stock market investments, were partly offset by gains in bond investments, which registered a return of HK$54.4 billion in the first quarter. This represented a nearly six-fold rise compared with the last quarter of 2019 and a 48 percent increase from a year ago.
During the first quarter of the year, Hong Kong’s benchmark Hang Seng Index plunged more than 16 percent, while the S&P 500, the Dow Jones Industrial Average and the Nasdaq Composite plummeted by over 20 percent, 13 percent and 14 percent, respectively.
