Norman Chan takes on HKMC roles

On October 1, Norman Chan took on the roles of Hong Kong Mortgage Corp. deputy chairman and executive director after Joseph Yam retired.      

Mr. Chan joined the Hong Kong government’s Administrative Services in 1976. In 1991, he was appointed deputy director (monetary management) of the Office of the Exchange Fund. Mr. Chan became an executive director of the Hong Kong Monetary Authority (HKMA) in 1993 and served there as deputy chief executive from 1996 to May 2005. Mr. Chan also served as an HKMC executive director from its incorporation in March 1997 to May 2005. From December 2005 to June 2007, Mr. Chan was vice chairman-Asia at Standard Chartered Bank. He was appointed director of the Chief Executive Office of the Hong Kong Special Administrative Region Government in July 2007 and became chief executive of the HKMA on October 1.  

Government reports deficit

The Hong Kong Special Administrative Region Government recently reported a deficit in its financial results for the five-month period that ended August 31.

Expenditures for the period April to August 2009 amounted to US$14.6 billion and revenues were US$8.12 billion, resulting in a deficit of US$6.47 billion.

A government spokesman said the deficit is mainly due to some major types of revenue, including salaries tax and profits tax, are mostly received toward the end of a financial year.

The fiscal reserves at end-August stood at US$56.91 billion.

Stock market fluctuates

In tandem with global stock market developments, the Hang Seng Index rose in September to another closing high since October 2008. Global stock markets, however, appeared to fluctuate more over increasing concerns about the timing of various central banks’ exit strategies and the endurance of the global economic recovery.

Exchange Fund totals US$246.1 billion

Total assets of the Hong Kong Exchange Fund amounted to US$246.1 billion on August 31. This is US$7.14 billion more than at end-July, according to the Hong Kong Monetary Authority.

Foreign currency assets increased US$8.29 billion, while Hong Kong dollar assets decreased US$1.15 billion.

The increase in foreign currency assets is due mainly to an increase in securities purchased but settled in the following month, purchases of foreign currencies with Hong Kong dollars and valuation gains on foreign currency investments.

The decline in Hong Kong dollar assets is due mainly to fiscal drawdowns and valuation losses on Hong Kong equities held by the Exchange Fund, which were partially offset by an increase in bank borrowings.

The Currency Board Account shows the Monetary Base at end-August was US$101.55 billion, an increase of US$2.74 billion, or 2.78%, from end-July. The increase in the Monetary Base is due mainly to an inflow of funds into the Hong Kong dollar .

Backing Assets increased US$2.93 billion, or 2.82%, to US$107.33 billion. The increase is attributable mainly to the increase in the Monetary Base together with revaluation gains and interest from investments.  Reflecting this, the backing ratio increased from 105.65% at end-July to 105.69% at end-August.

Interest rates remain low

Financial market conditions have improved over the past few months. The stock market continued to rebound, along with increased fund-raising activities. However, the ongoing worldwide stock market surge that began in March continues to elevate risks. As for local liquidity, the Hong Kong Interbank Offered Rate (HIBOR) across all tenors remained very low. Loans for use in Hong Kong decreased slightly in July after consecutive increases the previous two months, and declined 3.8% year-on-year.

Foreign currency reserves at US$226.9 billion

Hong Kong’s foreign currency reserve assets amounted to US$226.9 billion at end-September, according to the Hong Kong Monetary Authority, compared US$223.3 billion at end-August.

Including unsettled forward contracts, the foreign currency reserve assets stood at US$229.2 billion, compared to US$223.3 billion a month earlier.

Hong Kong is the world’s seventh-largest holder of foreign currency reserves, after mainland China, Japan, Russia, Taiwan, India and South Korea.

The total foreign currency reserve assets represent approximately nine times the currency in circulation, or 50% of Hong Kong dollar M3.

Hong Kong dollar weakens

The U.S. dollar weakened further in recent months against many major currencies. Under the Linked Exchange-Rate System, the Hong Kong dollar also weakened. The Effective Exchange Rate Index of the Hong Kong dollar showed a depreciation of 4.3% in September compared to the March peak.