Investment Objective

The constituent fund aims to provide a return higher than retail Hong Kong dollar savings deposit rate in Hong Kong.

Fund Details

Latest Fund Expense Ratio: 1.01%

Launch Date(dd/mm/yyyy): 01/12/2000

Unit Price: HKD 11.50

Fund Size: HKD 578.53M

Fund Commentary

Risk assets came under acute stress as markets digested fall out from Coronavirus (COVID-19) lockdowns while policy makers rushed to contain the damage. HK govt announced a total HK$257bn (9.5% of HK GDP) fiscal package to support the economy. Overall monetary conditions were stable with some tightening bias in March; monetary base increased by HK$18bn to HK$1681bn while Aggregate balance was at HK$54bn. 3-month HIBOR finished the quarter at 1.93% (-49bps) and 1-year HIBOR at 1.94% (-50bps) as Fed delivered 150bps cuts in 1Q20 while HKMA cut bank reserve requirements and reduced exchange bill issuance to support liquidity. HK yields were down following global yields as markets rushed to safe haven assets on global recession concerns. 1-year HK Government bond yield ended at 0.59% (-118 bps), 5yr at 0.60% (-114bps) and 10yr at 0.72% (-107bps). Curve bull steepened slightly and US yields outperformed HK yields. 5yr HK$IRS (interest rate swaps) and 10yr HK$IRS were down by 96 bps and 97 bps respectively to 1.02% and 1.08%. Markit’s HK Bond Index returned 5.0% in 1Q20 bringing last 12m returns to 6.5%. Due to low interest rates, gross fund returns remain low. Our strategy of generating returns in excess of 3-month HIBOR continues to do well. Global economic data expected to remain weak as global recession looms on COVID-19. FED delivered a 150-bps emergency cut and announced large scale QE to buy assets including corporate bonds while US announced a fiscal package of US$ 2trn. ECB announced additional QE and BOJ continue to pursue accommodative policies with willingness to do more if required. COVID-19 brought global economic activity to a halt which will keep markets volatility higher in near term. Lower HK rates will weigh on incremental return from reinvestments. HKMA will continue to pursue measures to support bank lending and liquidity. However, fragile HK political situation may continue to take toll on the sentiments keeping outflows from HK high.

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