The Hong Kong Special Administrative Region Government announced its financial results for April 2009, the first month of the current financial year.

Expenditure for the first month amounted to US$2.75 billion and revenue of US$2.34 billion, resulting in a deficit of US$410.25 million.

A government spokesman said that the deficit for the period was mainly because some major types of revenue including salaries and profits taxes were received toward the end of a financial year.

The fiscal reserves stood at US$62.97 billion as of April 30, 2009.

Exchange Fund totals US$210.94 billion

Total assets of the Hong Kong Exchange Fund amounted to US$210.94 billion on April 30, 2009. This is US$5.32 billion higher than at the end of March 2009, according to the Hong Kong Monetary Authority.

Foreign currency assets increased by US$4.42 billion and Hong Kong dollar assets increased by US$897.43 million.

The rise in foreign currency assets was due mainly to purchases of foreign currencies with Hong Kong dollars and valuation gains on foreign currency investments. The rise in Hong Kong dollar assets was due mainly to an increase in the balance of the banking system and valuation gains on Hong Kong equities held by the Exchange Fund. These increases were partly offset by sales of Hong Kong dollars for foreign currencies.

The Currency Board Account shows that the monetary base at the end of April 2009 was US$79.33 billion, an increase of US$6.25 billion, or 8.6%, from the end of March 2009. The rise was due mainly to increases in the Aggregate Balance and Certificates of Indebtedness.

The backing assets increased by US$5.93 billion, or 7.5%, to US$84.98 billion. The increase was attributable mainly to an increase in the aggregate balance and the issuance of Certificates of Indebtedness in the monetary base together with interestfrom investments. These increases were partly offset by revaluation losses.

Reflecting this, the backing ratio declined from 108.19% at the end of March 2009 to 107.13% at the end of April 2009.

Hong Kong: net creditor in external assets

Hong Kong released its international investment position (IIP) statistics for Hong Kong for the reference year of 2008.

IIP is a balance sheet showing the stock of external financial assets and liabilities of an economy at a particular time point.  External financial assets consist of financial claims on non-residents and other financial assets where no debtor is involved (e.g., monetary gold).  External financial liabilities refer to financial claims of non-residents on residents of the economy.

In compiling and presenting the IIP statistics, the standards prescribed in the Fifth Edition of the Balance of Payments Manual of the International Monetary Fund are adopted.

At end-2008, Hong Kong’s external financial assets and liabilities amounted to US$2,252.14 billion and US$1,636.69 billion respectively.  After netting out the external financial liabilities from the external financial assets, Hong Kong was a net creditor.  Hong Kong’s net external financial assets amounted to US$615.44 billion at end-2008, corresponding to 286% of GDP in that year.

The ratios of both Hong Kong’s external financial assets and liabilities at end-2008 to GDP in that year remained substantial, at 1,048% and 761% respectively, reflecting that Hong Kong is a highly externally oriented economy and also a major financial center in the region with considerable cross-territory investment.

Most of the broad IIP components were in net asset positions at end-2008, except direct investment (DI).  DI was in a net liability position as the amount of DI made by non-residents in Hong Kong was greater than that made by Hong Kong residents abroad.

Compared with end-2007, the net IIP at end-2008 grew US$131.65 billion.  This was mainly attributable to the decrease in the net liability position of DI, and the increases in reserve assets (RA) and in the net asset position of portfolio investment (PI) and financial derivatives (FD), which exceeded the decrease in the net asset position of other investment (OI).

A government spokesman says that Hong Kong’s international investment position remained sound and strong. The level of the net external financial assets increased significantly from the previous year with its ratio to GDP rising markedly to 286% in 2008 from 234% in 2007.  This was one of the key factors underpinning the resilience of the economy in the face of the global financial crisis.

The spokesman adds that both Hong Kong’s external financial assets and liabilities were enormous, particularly so when expressed as ratios to GDP.  This signified the diverse roles of Hong Kong as an international financial center, and a conduit for channeling investment funds to mainland China and other parts of the world.

Interest rates remain low

The Hong Kong Interbank Offered Rate (HIBOR) across all tenors remained low in the past two months, reflecting ample liquidity in the banking system. The aggregate balance reached a record high of US$32.94 billion in May. In overseas money markets, the TED spread fell back to the level close to those in early 2007, when the subprime problems began to emerge.  Locally, with economic activities contracting, total loans for use in Hong Kong registered the seventh consecutive month of month-to-month decline in April.

Hong Kong dollar weakens in May

In tandem with the weakening U.S. dollar in May, the Hong Kong dollar under the Link Exchange Rate System also softened during the month, but remained stronger than a year ago.

The Effective Exchange Rate Index of the Hong Kong dollar showed a year-on-year appreciation of 3.1% in May.

Stock market rebounds

In tandem with the overseas stock markets, the local stock market continued to rebound in May. 

Trading activity likewise improved, with average daily turnover increasing from US$5.97 billion in March to US$10.23 billion in May.

HKMC's 2008 results show record purchases

The Hong Kong Mortgage Corporation Limited (HKMC) published its Annual Report for 2008 on June 11, which highlights the following achievements:

1. Record purchase of a total of US$3.33 billion of assets in a year, including US$1.74 billion of residential mortgage loans and US$25.6 million of non-mortgage assets in Hong Kong as well as the purchase of US$1.56 billion of Korean residential mortgage loans structured as mortgage-backed securities;
2. Drawdown of mortgage insurance coverage for newly originated mortgage loans was a record total of US$2.61 billion, achieving a market penetration of 16%;
3. Issuance of a record of US$3.12 billion debt securities in a cost-effective manner, maintaining the HKMC’s position as the most active corporate issuer in the Hong Kong dollar debt market for eight consecutive years; and
4. Safeguarding excellent asset quality, with a combined delinquency ratio (above 90-day ratio and rescheduled loan ratio) of 0.02% for the mortgage insurance portfolio, 0.12% for the Hong Kong residential mortgage portfolio (compared to industry average of 0.19%), and 0.07% across all asset classes as of December 31, 2008.

The corporation achieved profit after tax of US$77.56 million in 2008, with the return on shareholder’s equity of 10.5% and cost-to-income ratio of 17.5%.  Its capital-to-assets ratio remained strong at 8.7%, well above the guideline of a minimum 5% stipulated by the Financial Secretary.  For the fifth consecutive year, the corporation declared a final dividend of US$32.05 million or US$0.016 per share, representing 41.3% of the profit after tax.