Hong Kong’s Exchange Fund recorded a robust investment gain of HK$67.2 billion (US$8.7 billion) in the first quarter of 2025, driven by strong performances in the local stock market and global bonds. The gain marked an improvement over the HK$62.3 billion posted in the same period last year and came as the Hang Seng Index surged by 15 percent, buoyed by optimism surrounding new developments in artificial intelligence, particularly the launch of cost-efficient, high-performance models by DeepSeek.
Despite this strong start, uncertainties loom for the remainder of the year following market disruptions caused by newly imposed US tariff policies in April. Eddie Yue Wai-man, Chief Executive of the Hong Kong Monetary Authority (HKMA), acknowledged these challenges while noting that capital continues to flow into Hong Kong, spurred by several major upcoming IPOs. He emphasized that this inflow is expected to further stimulate local market liquidity.
The Exchange Fund’s total assets fell to HK$3.98 trillion at the end of March, a decrease of HK$46 billion compared to the end of 2024. Within the first quarter, the fund earned HK$16.4 billion from Hong Kong stock investments, with notable contributions from a 21 percent increase in the Hang Seng Tech Index. However, it faced a HK$2.8 billion loss in overseas equities, contrasting sharply with a gain of HK$36.3 billion in the previous year. The loss was largely attributed to the S&P 500’s 4.6 percent decline, marking its weakest first-quarter performance since early 2022 amid persistent inflation concerns and recession fears in the United States.
Bond investments brought in a gain of HK$40.6 billion, up from HK$25.1 billion a year earlier, reflecting stronger global bond market performance. Additionally, the fund recorded a HK$13 billion foreign exchange valuation gain from non-US dollar assets, benefiting from a 4 percent drop in the US dollar DXY Index. This reversed a loss of HK$4.8 billion in the same category last year.
While returns on long-term investments were not disclosed, the HKMA intervened in currency markets three times since Saturday, spending HK$116.61 billion to purchase US$15 billion, in efforts to counteract the local currency reaching the strong end of its peg. Yue indicated that further interventions may be needed due to sustained capital inflows, which are expected to reduce interbank interest rates, supporting economic activity by lowering borrowing costs for businesses and homeowners. Fee payments to the fiscal reserves rose to HK$4.5 billion, up from HK$3.9 billion a year earlier.
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