US$15.83 billion surplus for first 11 months
The Hong Kong Special Administrative Region Government recorded expenditures of US$27.06 billion and revenues of US$42.89 billion between April 2007 and February 2008, resulting in a surplus of US$15.83 billion.
The territory’s fiscal reserves stood at US$63.16 billion as of February 29.
Exchange Fund totals US$187.43 billion
Assets of the Hong Kong Exchange Fund totaled US$187.43 billion on February 29. This is US$1.39 billion more than at end-January, according to the Hong Kong Monetary Authority.
Foreign currency assets increased US$743.58 million and Hong Kong dollar assets grew US$653.84 million.
The increase in foreign currency assets is mainly due to valuation gains on foreign currency investments, interest and dividend income from foreign currency assets and purchases of foreign currencies with Hong Kong dollars. These increases were partially offset by redemption of Certificates of Indebtedness.
The rise in Hong Kong dollar assets is mainly due to valuation gains on Hong Kong equities held by the Exchange Fund and placements received from fiscal reserves, which were partially offset by the sale of Hong Kong dollars for foreign currencies.
The Currency Board Account shows the monetary base at end-February was US$42.47 billion, a 2.1% decrease from a month earlier. The decline is mainly due to a decrease in Certificates of Indebtedness.
Backing assets decreased 1.6% to US$46.67 billion. The devaluation is mainly attributable to the redemption of Certificates of Indebtedness in the monetary base, which was partially offset by revaluation gains and interest from investments. Reflecting this, the backing ratio rose to 109.88% at end-February from 109.3% at end-January.
Foreign currency reserves at US$160.7 billion
Hong Kong’s foreign currency reserves stood at US$160.7 billion at end-March, according to the Hong Kong Monetary Authority, up from US$160.2 billion at end-February.
Including unsettled forward contracts, the foreign currency reserve assets of Hong Kong at end-March also stood at US$160.7 billion, compared to US$160.2 billion the previous month.
Based on the latest published figures, Hong Kong is the world’s ninth-largest holder of foreign currency reserves after mainland China, Japan, Russia, India, Taiwan, Korea, Brazil and Singapore.
The total foreign currency reserve assets represent more than seven times the currency in circulation, or approximately 38% of Hong Kong dollar M3.
Interest rates fall further in March
 The Hong Kong Interbank Offered Rates (HIBORs) remained low in February and March. Despite the shorter-dated HIBORs edging up due to IPO activities in late February-early March, the HIBORs in general fell in the second half of March, tracking the interest rate cuts by the U.S. Federal Reserve. Following the 75-basis-point cut in the Fed Fund Target Rate in mid-March, local banks reduced their Hong Kong dollar prime lending rates further, though by a lesser extent of 50 basis points.
Dollar weakens
 The Hong Kong dollar depreciated further against other major currencies in February and March, given the continued weakness of the U.S. dollar. The euro appreciated to a record high toward the end of the month, and the renminbi also recorded a post-revaluation high.
Stock market continues to consolidate
 Consolidation and volatility remained the theme of the local stock market in February and March as the recovery toward the end of January proved to be short-lived. This coincided with the further downward adjustment in other major stock markets, as worries about the weakening U.S. economy and the credit crunch intensified. The Hang Seng Index fell to approximately 21,000 in mid-March before rebounding somewhat to close the month at 22,849. The daily average turnover of the stock market in the first quarter of 2008, at US$12.65 billion, was down 27% from the fourth quarter of 2007.
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