Government maintains budget surplus
The Hong Kong Special Administrative Region Government had expenditures of US$30.3 billion and revenue of US$36.69 billion for the period April 2008 to January 2009, resulting in a surplus of US$6.38 billion.
A surplus of US$2.42 billion was recorded in January.
A government spokesman said that the surplus in January is mainly due to the receipts of salaries tax and profits tax.
Taking into account major one-time expenditures to be incurred in March, including injection into Mandatory Provident Funds accounts, the Research Endowment Fund, etc. and other government expenditures towards the year-end, the revised estimate for the financial year ending March 31, 2009, as announced in the Budget Speech on February 25, is a deficit of US$628.2 million.
The territory’s fiscal reserves stood at US$69.57 billion as of January 31, 2009. In the revised estimate announced in the Budget Speech, the fiscal reserves are estimated to be US$62.56 billion, as of March 31, 2009.
Foreign currency reserves at US$181.7 billion
Hong Kong’s foreign currency reserve assets stood at US$181.7 billion at end-January, according to the Hong Kong Monetary Authority, compared to US$182.5 billion at end-December.
Including unsettled forward contracts, the foreign currency reserve assets also stood at US$181.7 billion, compared to US$184.8 billion a month earlier.
Hong Kong is the world's eighth-largest holder of foreign currency reserves after mainland China, Japan, Russia, Taiwan, India, South Korea and Brazil.
The US$181.7 billion in foreign currency reserve assets represent approximately seven times the currency in circulation, or 43% of Hong Kong dollar M3.
Interest rates lower
 Alongside the Fed Fund Target Rate, the Hong Kong Interbank Offered Rate across all tenors has decreased at least 75 basis points since December 16. The rate was hovering in the 0-0.25% zone.
Meanwhile, in the overseas financial markets, the TED spread (the spread measuring counterparty risk between financial institutions) declined further in the last two months, from its peak in October 2008. However, other measures of risk covering sovereign and corporate lending remained high, with some actually continuing to trend upward.
In the local financial markets, amid depressed economic activity and tight lending conditions, total loans for use in Hong Kong registered the third consecutive month of month-to-month declines in December.
Hong Kong dollar stays strong
 The U.S. dollar remained strong in January against most other major currencies; the Japanese yen and renminbi were exceptions. Under the Linked Exchange-Rate System, the Hong Kong dollar also stayed strong. The Effective Exchange Rate Index of the Hong Kong dollar showed a year-on-year appreciation of 1.6% in January.
Stock market’s rebound unsustainable
 In tandem with global stock market developments, the local stock market staged a rebound in December and in early January before falling back to around 13,300 at the end of January. Concern about the global economic meltdown and its repercussions weighed heavily on the Hang Seng Index and markets worldwide as January trudged on. Trading activity remained weak compared to early 2008. Daily turnover averaged US$6.11 billion in January.
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