HONG KONG - Hong Kong’s Exchange Fund, which is used to back the Hong Kong dollar, posted an investment loss of HK$10.6 billion (US$1.37 billion) in the first half of 2020, the Hong Kong Monetary Authority (HKMA) said on Friday.

The figure compared with a HK$178.4 billion investment gain in the same period a year earlier. In 2019, the exchange fund recorded adjusted investment income of HK$262.2 billion

The figure compared with a HK$178.4 billion investment gain in the same period a year earlier. In 2019, the exchange fund recorded adjusted investment income of HK$262.2 billion.

The HKMA is the key manager of the Exchange Fund, which is controlled by the financial secretary and invests in equities, bonds, foreign exchange and other securities and assets

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The fund's investment income of HK$101.4 billion in the second quarter largely offset the investment loss of HK$112 billion in the first quarter.

Fees on placements by the fiscal reserves amounted to HK$18.6 billion, while fee payments to placements by government funds and statutory bodies amounted to HK$5.8 billion. 

The fund's total assets fell HK$11.4 billion to HK$4.1953 trillion.

HKMA Chief Executive Eddie Yue said the outbreak of COVID-19 caused wild swings in financial markets in the first half of the year.

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He noted that traditional asset classes, including equities and bonds, which account for the bulk of the Exchange Fund's assets, managed to recoup the investment loss made in the first quarter.

Looking ahead, Yue said the investment environment in the second half of the year remains challenging.

"Geopolitical developments and the risk of resurgence of COVID-19 also add to uncertainties surrounding the markets,” he said.

"Against such backdrop, we will strive to preserve defensiveness and liquidity when managing the Exchange Fund's investments, so as to enhance resilience against any market volatility while ensuring sufficient liquidity to maintain Hong Kong's monetary and financial stability," he added.

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