Exchange Fund totals US$275.85 billion

Total assets of the Hong Kong Exchange Fund amounted to US$275.85 billion on December 31, US$10.73 billion lower than a month earlier, according to the Hong Kong Monetary Authority.

Foreign currency assets decreased US$10.74 billion while Hong Kong dollar assets increased US$12.82 million.

The decline in foreign currency assets is due mainly to a decrease in unsettled purchases of securities and valuation losses on foreign currency investments. These decreases were partially offset by purchases of foreign currencies with Hong Kong dollars and an increase in Certificates of Indebtedness. The increase in Hong Kong dollar assets is due mainly to valuation gains on Hong Kong equities.

The Currency Board Account shows the monetary base at end-December was US$129.57 billion, a US$1.87 billion (1.5%) increase from end-November.  The increase in the monetary base is due mainly to an inflow of funds into the Hong Kong dollar and an increase in Certificates of Indebtedness. The latter reflects the seasonal demand for banknotes around Christmas and New Year.

Backing assets increased US$1.5 billion, or 1.1%, to US$138.6 billion. The increase is attributable mainly to the rise in the monetary base, together with interest from investments. These increases were partially offset by revaluation losses. Reflecting this, the backing ratio decreased from 107.36% at end-November to 106.96% a month later.

US$4.83 billion surplus recorded in December

The Hong Kong Special Administrative Region Government recorded a surplus of US$4.83 billion in December, which reduced the budget deficit to US$153.84 million for the nine months that ended December 31. Expenditures for the period amounted to US$26.26 billion, compared to revenues of US$26.11 billion.           

A government spokesman said the improved financial results in December are mainly due to the receipt of US$4.29 billion in investment income from fiscal reserves. With these latest results and because the outturn for some major revenue sources, including land premium and stamp duties, is likely to exceed previous estimates, it is expected that the financial results for 2009-10 will be better than originally forecast. The revised estimate for the current financial year will be published along with the 2010-11 Budget on February 24.           

Fiscal reserves stood at US$63.21 billion on December 31.

Foreign currency reserves at US$257.1 billion

Hong Kong’s official foreign currency reserve assets amounted to US$257.1 billion at end-January, according to the Hong Kong Monetary Authority, compared to US$255.8 billion a month earlier.           

Including unsettled forward contracts, foreign currency reserve assets at end-January also stood at US$257.1 billion, compared to US$255.8 billion at end-December.           

Based on the latest published figures, 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 of US$257.1 billion represent more than nine times the currency in circulation, or approximately 55% of Hong Kong dollar M3.