Reserves up, but grip on purse strings tight

Hong Kong’s Exchange Fund gained HK$41.2 billion in the third quarter thanks to a favorable investment environment, recovering from a HK$5.6 billion loss in the second quarter.

But despite the hefty return, Norman Chan Tak-lam, chief executive of the Hong Kong Monetary Authority, was quick to shut the door to suggestions that it set up a public trustee for the mandatory provident fund.

“The statutory purpose of the Exchange Fund is to stabilize the local currency, banking system and financial market … not for seeking returns on investment,” he told a Legislative Council financial affairs panel meeting. Chan had been asked by a lawmaker if the authority would consider launching low-fee MPF products and become a public trustee.

All sectors of the fund recorded profits in the third quarter, with Hong Kong stocks gaining HK$9.3 billion, HK$14.4 billion coming from foreign equity, HK$10.8 billion from bonds and HK$6.6 billion from currency investments.

Cumulative profit so far this year amounted to HK$80.1 billion, and the government would share a dividend of HK$28.5 billion, the authority said.

But Chan said it is difficult to predict the performance of the reserves in the fourth quarter.

Chan, meanwhile, did not agree with the widely held notion that “hot money” came to Hong Kong to speculate on the yuan. Instead, he believes, capital came for “normal economic activities.”