DISCUSSION TOPICS
Updates on
–
Financial and Economic Environment
–
Currency Stability
–
Banking Stability
–
Financial Infrastructure
–
Hong Kong as an International Financial Centre
–
The Exchange Fund
2
FINANCIAL AND ECONOMIC
ENVIRONMENT
3
GLOBAL FINANCIAL MARKETS
• Credit market conditions improved and equity prices rebounded
3-Month Libor spread over OIS
bps
bps
400
350
MSCI World and Asia indices
400
US
Eurozone
UK
300
Jan 2006 = 100
140
MSCI World
MSCI Asia-Pacific
350
300
120
250
250
200
100
200
150
150
80
100
100
50
50
0
0
-50
Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09
Source: Bloomberg
60
40
2006
2007
2008
2009
Source: Bloomberg
4
ECONOMIC CONDITIONS IN ADVANCED ECONOMIES
• Contraction in advanced economies slowed in Q2, with business
sentiment improving to the pre-crisis level
GDP growth: US, euro area and Japan
% qoq annualised
8
US
6
Euro area
% qoq annualised
8
Japan
6
PMI: US, euro area and Japan
65
60
4
4
2
2
0
0
-2
-2
45
-4
-4
40
-6
-6
-8
-8
-10
-10
-12
-12
25
-14
2006
-14
20
2006
2007
Source: CEIC
2008
2009
55
50
US non-manufacturing ISM
Euro area PMI composite
Japan PMI
35
30
2007
2008
2009
Source: Bloomberg
5
SUSTAINABILITY OF RECOVERY
• To the extent that economic activity has been boosted by fiscal
stimulus packages, the underlying strength of the economy is
questionable
US new motor vehicle registration
US government outlays
% yoy 3mma
% yoy
25
10
5
20
US Government Outlays
0
-5 2006
15
2007
2008
2009
-10
-15
-20
10
-25
-30
5
-35
0
Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09
Source: Bloomberg
-40
-45
Source: CEIC
6
ADVERSE FEEDBACK BETWEEN
REAL ECONOMY AND FINANCIAL SECTOR
• Rising unemployment rates suggest continuing loan losses for
banks, which in turn restrict lending and weigh on growth
Unemployment rate:
US, euro area and Japan
%
12
Lending standards
ppt
US - Consumer loans
80
US
Euro Area
Japan
Euro area - Consumer credit
70
10
60
50
8
40
tightening
30
6
20
4
10
0
2
loosening
-10
0
-20
00
01
02
03
Source: CEIC
04
05
06
07
08
09
00
01
02
03
04
05
06
07
08
09
Note: An index reading above zero means tightening
lending standards
Sources: Federal Reserve, EcoWin
7
ECONOMIC CONDITIONS IN EMERGING ASIA
GDP growth: NIE-3
% qoq annualised
% qoq annualised
Korea
20
GDP growth: ASEAN-4
Taiwan
Singapore
% qoq annualised
% qoq annualised
20
20
20
10
10
10
10
0
0
0
0
Indonesia
Malaysia
Philippines
Thailand
-10
-10
-10
-20
-20
-20
-20
-30
-30
-30
-30
2006
2007
Source: CEIC
2008
2009
2006
2007
2008
-10
2009
Source: CEIC
8
ACCOMMODATIVE MONETARY POLICY
• Monetary accommodation is likely to remain for some time
Consensus forecasts for 2009 growth:
US, euro area, Japan, China and Asia
% yoy
10
US
China
Asia ex Japan
Japan
Euro Area
% yoy
10
8
8
6
6
4
4
2
2
0
0
-2
-2
-4
-4
-6
-6
-8
May-08
-8
Aug-08
Nov-08
Feb-09
Source: Consensus Forecasts
May-09
Aug-09
Policy rates: US, euro area, Japan
%
US
Euro area
Japan
5
4
3
2
1
0
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Source: Bloomberg
9
RECOVERY IN HONG KONG
Quarter-on-quarter
change (%)
Contribution to change
in real GDP (% point)
8
8
6
6
4
4
2
2
0
0
-2
-2
-4
-4
-6
-6
-8
-8
Q1
2008
Q2
Q3
Q4
Private consumption (lhs)
Fixed investment and inventory (lhs)
Real GDP (rhs)
Q1
2009
Q2
Q3
Government consumption (lhs)
Net exports (lhs)
10
OUTPUT LOSS IN COMPARISON WITH
THE ASIAN FINANCIAL CRISIS
Real Output Index, SA
102
Q1 2008
100
98
96
Q3 1997
-7.8% -8.9%
94
92
90
88
86
0
1
2
3
4
5
6
7
Number of quarters
11
LABOUR MARKET CONDITIONS
% of labour force
% 3m-on-3m
10
5
8
4
+4.3 ppt
+2.2 ppt
6
4
3
2
+4.0 ppt
2
1
0
0
-2
Unemployment rate
fell to 5.3% in Sept
Change in employment level (% 3m-on-3m) (rhs)
Unemployment rate (%) (lhs)
-4
Employment
grows again
-1
-2
97
98
99
00
01
02
03
04
05
06
07
08
09
12
HOUSEHOLD BALANCE SHEET CONDITIONS
Delinquency Ratios
%
2.0
1.8
Mortgage Delinquency Ratio
Credit Card Deliquency Ratio
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
97 98 99 00 01 02 03 04 05 06 07 08 09 10
13
CORPORATE BALANCE SHEET CONDITIONS
Change in the Number of
Registered Companies
Net Change in Number of Registered Companies (3mma)
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
-1,000
-2,000
-3,000
97 98 99 00 01 02 03 04 05 06 07 08 09 10
Note: Shaded areas indicate periods when real GDP
declined for two or more consecutive quarters
14
BANKING SECTOR CONDITIONS (I)
Capital adequacy ratio
%
20
18
16
14
12
10
8
6
4
2
0
1997 1999 2000 2001 2002 2004 2005 2006 2007 2009
15
BANKING SECTOR CONDITIONS (II)
Asset quality
Classified loans (gross)
Overdue and rescheduled loans
%
12
10
8
6
4
2
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
16
INFLOWS INTO THE HONG KONG DOLLAR
HKD billion
800
Outstanding EFBN
700
Aggregate Balance
600
500
400
300
200
100
0
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09*
* Figure as of 29 Oct 2009.
17
CROSS-BORDER CAPITAL INFLOWS
HKD billion
200
Current account balance
Private sector capital inflows
150
100
50
0
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
-50
-100
18
RISKS TO FINANCIAL STABILITY IN HONG KONG (I):
INFLATION
Inflation rate in HK vs. other Asian economies
yoy%
10
Hong Kong
Korea
Singapore
Thailand
8
6
IMF projections
4
2
0
-2
-4
-6
2007
2008
2009
2010
Sources: CEIC, IMF World Economic Outlook and HKMA estimates
19
RISKS TO FINANCIAL STABILITY IN HONG KONG (II):
ASSET BUBBLE: STOCK MARKET
Rebased to Oct 27, 2008 = 100
250
Hong Kong's Hang Seng Index
200
MSCI Pacific
(excl. HK & Japan)
150
100
U.S. S&P 500
50
Mar 9, 2009
0
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
20
EQUITY MARKET VALUATION
Price-earnings ratio of HSI
Times
30
Lehman
failure
Internet
bubble burst
US sub-prime
crisis unfolded
25
Asian financial crisis
11 Sep incident
20
Sep 09
18.4
15
10
Long-term average: 14.8 times
(May 73 - Sep 09)
±1 standard deviation band
5
Mar-95
Mar-97
Mar-99
Mar-01
Mar-03
Mar-05
Mar-07
Mar-09
21
BANKING EXPOSURE TO THE STOCK MARKET
%
12
10
non-margin lending (% share)
8
margin lending (% share)
6
4
2
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1
22
RISKS TO FINANCIAL STABILITY IN HONG KONG (III):
ASSET BUBBLE : RESIDENTIAL PROPERTIES
1997 Q3 = 100
Flat size of 160 sq. metres or above*
120
Flat size of 100 - 159.9 sq. metres*
Flat size below 100 sq. metres*
100
80
60
40
20
Note: * Popular development
0
1996
1998
2000
2002
2004
2006
2008
23
GRAPHICAL FRAMEWORK OF PROPERTY MARKET
Real property prices
Real new
mortgages
Transaction
volume
Income
gearing
Confirmor
transactions
Buy-rent gap
Q2-3 1997
Jun - Aug 2009
Q2 2003
Q4 2008
24
RISK OF FUND FLOW REVERSAL
US dollar exchange rates could revert to their longer-term trends
Mar 1973 = 100
160
USD nominal effective exchange rate: major currencies
150
USD real effective exchange rate: major currencies
140
130
120
110
100
90
80
70
60
73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09
25
RELATIONSHIP BETWEEN
PUBLIC DEBT AND EXCHANGE RATE: US SITUATION
US government debt and value of USD
% of GDP
USD NEER
(Mar-73 = 100)
90
160
80
140
70
120
60
100
50
80
40
60
30
Federal debt held by the public (lhs)
20
USD NEER (rhs)
40
20
10
0
0
70
75
80
85
90
95
00
05
10
Source: IMF, CEIC
26
RELATIONSHIP BETWEEN
PUBLIC DEBT AND EXCHANGE RATE: JAPAN’S EXPERIENCE
Japan’s general government debt and value of yen
JPY NEER
(Jan-70 = 100)
Percentage of GDP
Dec-08: 493
600
Dec-99: 457
500
200
180
160
Apr-95: 463
400
140
120
300
100
80
200
60
100
JPY NEER (lhs)
40
General Government Gross Debt (rhs)
20
0
0
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08
Sources: CEIC and Haver Select
27
Inflation
NEAR-TERM ECONOMIC
OUTLOOK
• A recovery should be in place
• Inflationary pressure is likely to remain subdued
• Unemployment rate may stay high
Projection for 2009
%YoY
%
UnemployGDP
CPI
ment rate
HK Government
(Aug 09)
Projection for 2010
%YoY
%
UnemployGDP
CPI
ment Rate
-3.5 to -4.5
0.5
-
-
-
-
IMF (Nov 09)
-2.0
-1.0
5.1
5.0
0.5
4.8
ADB (Sep 09)
-4.0
1.3
-
3.0
2.0
-
Consensus (Oct 09)
-3.1
0.4
5.4
3.7
1.7
5.2
28
RISKS TO ECONOMIC OUTLOOK
• Reduced strength of global recovery
• Re-intensification of the adverse
feedback between the real and financial
sectors
• Incorrect timing of exit strategies
29
CURRENCY STABILITY
30
HONG KONG DOLLAR STAYED CLOSE TO 7.75
HKD / USD
7.90
HKD / USD
7.90
Convertibility Zone
7.85
7.85
7.80
7.80
7.75
7.75
Spot exchange rate
7.70
7.70
7.65
7.65
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2004
2005
2006
2007
2008
2009
31
AGGREGATE BALANCE REMAINED HIGH
HKD billion
260
240
220
200
180
160
140
120
100
80
60
40
20
0
HKD billion
260
240
220
200
180
160
140
120
100
80
60
40
20
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2004
2005
2006
2007
2008
2009
32
MONETARY BASE EXPANDED
HKD billion
1000
900
Outstanding EFBN
800
Aggregate Balance
700
Certificates of Indebtedness
and Gov't Notes and Coins
600
500
400
300
200
100
0
1Q08
2Q08
3Q08
* Figure as of 2 Nov 2009.
4Q08
1Q09
2Q09
3Q09
4Q09*
33
FORWARD DISCOUNT REMAINED STABLE
HKD / USD
HKD / USD
7.85
7.85
Spot
7.80
7.80
7.75
7.75
12-month forward
7.70
7.70
7.65
7.65
Q1
Q2
Q3
2007
Q4
Q1
Q2
Q3
2008
Q4
Q1
Q2
Q3
Q4
2009
34
LOW DOMESTIC INTEREST RATES
% pa
6
% pa
6
5
Overnight LIBOR
5
5
4
Overnight HIBOR
4
4
% pa
6
3-month LIBOR
5
3-month HIBOR
4
3
3
3
3
2
2
2
2
1
1
1
1
0
0
0
0
Jan-08
Jul-08
Jan-09
Jul-09
% pa
6
Jan-08
Jul-08
Jan-09
Jul-09
35
GROWTH IN HK DOLLAR LOANS AND
DEPOSITS PICKED UP
10
% change over
3 months ago
% change over
3 months ago
10
8
8
6
6
4
4
2
2
0
0
-2
-2
HKD deposits
-4
-4
HKD loans
-6
-6
-8
-8
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2005
2006
Note: Quarter-end figures
2007
2008
2009
36
STRATEGY TO COPE WITH INFLOWS
• Under the Currency Board system, the strong-side
CU will be triggered to buy USD and sell HKD at 7.75
• Issuance of additional Exchange Fund Bills, subject
to market demand
• Little room for the use of monetary tools to contain
inflows-induced price pressure
• Need to strengthen prudential and supervisory
measures
37
STRATEGY TO DEAL WITH
REVERSAL OF FUND FLOWS
• Market operations under the Currency Board System
–
Foreign reserves built up during the inflow and the large
pool of EF paper held by banks will help cushion the
downward pressure on HKD if weak-side CU is triggered
–
Where appropriate, within-zone operations can be
conducted to ensure orderly adjustment in monetary
conditions
• Raise the alertness of banks and borrowers to risk of
reversal of fund flows
–
Remind all market players the exceptionally low interest
rates will not last forever
–
Strengthening of risk management is the best means of
protection from market volatilities in the future
38
BANKING STABILITY
39
BANKING SECTOR PERFORMANCE
Capital adequacy ratio improved
18.0
%
Capital adequacy ratio of locally incorporated AIs
16.5%
16.0
14.0
12.0
10.0
8.0
6.0
Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09
40
BANKING SECTOR PERFORMANCE
Liquidity level remained high
55
50
%
Quarterly average liquidity ratio of retail banks
47.5%
45
40
35
30
25
20
Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09
41
BANKING SECTOR PERFORMANCE
Loan quality showed signs of stabilisation
Overview of loan quality
Classified loan ratio
Currrent: 1.51% (Jun 2009)
Peak: 10.61% (Sep 1999)
100
80
60
RML delinquency ratio
Current: 0.05% (Sep 2009)
Peak: 1.43% (Apr 2001)
40
20
0
Number of
negative equity RMLs
Current: 3,767 (Jun 2009)
Peak: 105,697 (Jun 2003)
Ratio of overdue and
rescheduled loans
Current: 1.05% (Jun 2009)
Peak: 8.58% (Sep 1999)
Credit card
charge off ratio
Current: 4.61% (Q2 2009)
Peak: 14.55% (Q3 2002)
Peak
Latest
42
BANKING SECTOR PERFORMANCE
Net interest margin of retail banks further narrowed
2.1
%
Net interest margin of retail
banks (quarterly annualised)
2.0
1.9
1.8
1.78%
1.7
1.6
1.5
1.4
1.41%
1.3
1.2
Sep-07 Dec-07 Mar-08
Jun-08 Sep-08 Dec-08
Mar-09
Jun-09 Sep-09
43
BANKING SECTOR PERFORMANCE
Hong-Kong-dollar loan-to-deposit ratio declined
HK$ billion
80%
3,000
70%
60%
2,500
50%
40%
2,000
30%
20%
1,500
10%
1,000
0%
Sep-07
Dec-07
HK$ loans (LHS)
Mar-08
Jun-08
Sep-08 Dec-08
HK$ deposits (LHS)
Mar-09
Jun-09
Sep-09
HK$ loan-to-deposit ratio (RHS)
44
BANKING SECTOR PERFORMANCE
Total loans of retail banks almost returned to pre-crisis level
HK$ billion
2,300
2,100
1,900
1,700
1,500
Sep-07
Dec-07
Loans for use in HK
Mar-08
Jun-08
Sep-08
Trade finance
Dec-08
Mar-09
Jun-09
Sep-09
Loans for use outside HK
45
RESIDENTIAL MORTGAGE LENDING

Reminded AIs to be prudent in setting mortgage
interest rates

Lowered the LTV ratio for luxury properties

Stressed the need for prudence in property valuation
and in assessing borrowers’ repayment ability and
provided additional guidance to AIs
46
SUPERVISORY POLICY INITIATIVES
• Consultative papers issued
 Enhancements to the Basel II capital
framework
 Guideline on a Sound Remuneration
System
• Proposals to strengthen the liquidity
regime will be issued for consultation in
early 2010
47
DEPOSIT PROTECTION

Completed a review of the Deposit Protection
Scheme (DPS) in light of lessons learnt from the
financial crisis

Aim at submitting legislative proposals to LegCo in
Q1 2010 to raise coverage amount to $500,000 and
introduce other changes

Formed a tripartite working group with Malaysia and
Singapore to coordinate exit from full deposit
guarantee at the end of 2010
48
LEHMAN-RELATED ISSUES MINIBOND REPURCHASE SCHEME
 About 97% of eligible customers (exceeding
24,000) accepted the repurchase offer of banks
 About 4,800 previously settled customers
eligible for voluntary top-up offer
 Investigation will continue in respect of about
800 cases involving ineligible customers or
customers who have rejected the offer
49
LEHMAN-RELATED ISSUES INVESTIGATION PROGRESS
 Received nearly 22,000 Lehman-related complaints,
of which around 7,700 relate to non-minibond
products
 Of the non-minibond complaints:
 766 cases under disciplinary consideration
 2,473 cases closed due to insufficient evidence
 4,457 cases in progress
 Aims to substantially complete the investigation of
all outstanding complaints by end-March 2010
50
REPORT ON COMPLAINTS ABOUT SALE OF
LEHMAN-RELATED INVESTMENT PRODUCTS

Recommendations which can be introduced by RIs
quickly have been implemented
 Audio recording: by 30 June 2009
 Physical segregation: by 30 September 2009

Proposals to enhance investor protection issued for
public consultation in September

Assisting Government on proposals to improve investor
education and establish a financial services ombudsman
51
FINANCIAL INFRASTRUCTURE
52
FINANCIAL MARKET INFRASTRUCTURE
Development strategy:
 Robust and efficient payment and settlement
system is essential to monetary and financial
stability – important to ensure fault-proof day-today operation
 Business development – Hong Kong as a
settlement service utility centre to attract
transaction banking business in the region
53
FINANCIAL MARKET INFRASTRUCTURE

New functions and capabilities of payment and settlement
systems introduced in 2009:
 March 2009: Payment arrangements with Mainland China’s
foreign currency payment systems to facilitate cross border
correspondent banking activities
 July 2009: Upgrading the RMB RTGS system in Hong Kong
to clear and settle the use of RMB for Mainland’s external
trade with Hong Kong and ASEAN economies
 August 2009: CMU Fund Order Routing and Settlement
Service to provide a standard processing platform for
investment funds in Hong Kong and in the region

To be introduced in 2010
 Payment-versus-payment link between Hong Kong’s US
dollar RTGS system and the Indonesian Rupiah RTGS
system to reduce settlement risk in USD/Rupiah forex
transactions and to attract Indonesian banks to use Hong
Kong for their USD payment activities
54
GOVERNMENT BOND PROGRAMME
• Objective: to promote bond market development
and financial stability
• HKMA is assisting the Government in
implementing the Programme
• The first two bond issues under the Institutional
Bond Issuance Programme were well-received by
the market, with the bid-to-cover ratios of 6.45
and 4.56
• The Retail Bond Issuance Programme will be
launched when market conditions are appropriate
55
DEVELOPMENT OF ISLAMIC FINANCE
Promote market infrastructure
HKMA’s Four-Part Strategy

Continue to support the Government in drawing up legislative
proposals for modifying Hong Kong’s tax laws
Encourage product development

Maintaining close contact with the industry
Build regional and international profile

Hosted the Technical Committee Meeting for the Islamic Financial
Services Board

Signed MoU with Bank Negara Malaysia

Conducted an educational talk for representatives of Bank of
Ningxia
Promote market awareness

Continue to provide training to the industry and help resolve tax
and regulatory issues
56
HONG KONG AS AN
INTERNATIONAL
FNANCIAL CENTRE
57
INCREASING REGIONAL AND INTERNATIONAL
FINANCIAL CO-OPERATION
• Financial Stability Board (FSB): Hong Kong participates in the
Plenary and all three Standing Committees of the FSB, which has
become a focal point of efforts to reform the international financial
system
• Chiang Mai Initiative Multilateralisation (CMIM): Hong Kong will
participate in this regional joint-defense mechanism that provides
participating economies with contingent credit facilities
• 14th EMEAP Governors’ Meeting, 21-23 July, Hong Kong: HKMA
coordinated the macro-monitoring work of EMEAP
• Tripartite working group of HKMA, Bank Negara Malaysia and
Monetary Authority of Singapore: To map out a coordinated strategy
for the scheduled exit from the full deposit guarantee by the end of
2010
58
RENMINBI BUSINESS (1)
Renminbi trade settlement pilot scheme
• Commenced operation on 6 July, covering trades between
pilot cities in the Mainland and HK, Macau and ASEAN
countries
• Banks in HK can offer a wide range of renminbi business to
trade enterprises
• At end-Sep, 32 authorized institutions had entered into the
clearing agreement with the Clearing Bank or Mainland
Correspondent Banks
• Roadshows were conducted to promote HK’s renminbi
clearing platform to the ASEAN countries
59
RENMINBI BUSINESS (2)
Renminbi bond issuance in Hong Kong
• PRC Ministry of Finance issued RMB 6 bn in
sovereign bonds in September
• HSBC (China) and Bank of East Asia (China)
issued RMB 7 bn worth of bonds in total
• China Development Bank issued renminbi
bonds in Hong Kong raising RMB 3 bn
60
THE INVESTMENT ENVIRONMENT
AND
PERFORMANCE OF
THE EXCHANGE FUND
61
INVESTMENT ENVIRONMENT IN Q1-Q3 2009
• Exchange rates: US dollar strengthened against the euro and
the yen in the first quarter before weakening in the
subsequent two quarters
• Equity markets: Major markets declined in the early months
of the year but rebounded strongly since mid-March as risk
appetite increased on the hope of economic recovery
• Interest rates: US government bond yields, especially longterm yields, rose in the first half of 2009 on inflation
expectation and concern over large increases in supply,
before declining moderately in the third quarter
• Market optimism emerged since mid-March following the US
government’s introduction of quantitative easing. Appetite
for risky assets increased amid further signs of stabilisation
in the global economy
62
CURRENCY MARKET FLUCTUATION
USD/Euro FX Rate
Yen/USD FX Rate
1.55
103
Yen/USD FX Rate (RHS)
1.50
100
1.45
97
1.40
94
1.35
91
1.30
USD/EURO FX Rate (LHS)
88
1.25
1.20
Jan-09
85
Feb-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
63
PERFORMANCE OF MAJOR EQUITY MARKETS
Normalised Index Level (2008 year-end = 100)
160
150
140
Hang Seng Index
130
120
110
100
S&P 500
DAX
90
80
70
Jan-09
Feb-09 Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
64
10-YEAR UST YIELD
Yield (%)
4.4
4.0
3.6
3.2
2.8
2.4
2.0
Jan-09
Feb-09 Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
65
INVESTMENT INCOME
2009
2008
2007
2006
Jan - Sep *
Full Year
Full Year
Full Year
Gain/(Loss) on Hong Kong
equities^@
(77.9)
55.8
35.9
Gain/(Loss) on other equities^
(73.1)
6.7
18.7
Exchange gain/(loss)
(12.4)
18.7
17.3
88.4
61.0
31.9
(75.0)
142.2
103.8
(HK$ billion)
Return from bonds#
Investment income/(loss)@
* Unaudited figures
^ Including dividends
#
Including interest
@
Excluding valuation changes in Strategic Portfolio
66
CHANGES IN INVESTMENT INCOME, PAYMENT TO
TREASURY AND ACCUMULATED SURPLUS
I
I
2009
Q2
Q1
Full year
58.5
(33.5)
(75.0)
0.2
0.0
0.3
Interest and other expenses
(1.2)
(0.7)
(6.5)
Net investment income / (loss)
57.5
(34.2)
(81.2)
Payment to Treasury #
(8.5)
(9.1)
(46.4)
(0.3)
0.0
0.0
3.2
(0.1)
(8.9)
51.9
(43.4)
(136.5)
(HK$ billion)
Jan - Sep *
Investment income / (loss)
Other income
Q3
2008
Payment to HK government /
statutory bodies #
Valuation change of Strategic Portfolio ^
Increase / (Decrease) in EF
accumulated surplus
* Unaudited figures
# The fixed rate of fee payment is 6.8% for 2009 and 9.4% for 2008
^ Including dividends
67
HISTORICAL INVESTMENT INCOME
(HK$ billion)
Year
Full Year
Q4
Q3
Q2
Q1
2001
7.4
13.6
10.4
(2.0)
(14.6)
2002
47.0
26.3
(2.1)
26.5
(3.7)
2003
89.7
33.5
8.4
41.1
6.7
2004
56.7
33.0
14.1
(7.2)
16.8
2005
37.8
7.3
19.0
13.6
(2.1)
2006
103.8
36.0
37.1
12.5
18.2
2007*
142.2
33.4
61.8
26.3
20.7
2008*
(75.0)
8.3
(48.3)
(20.4)
(14.6)
58.5
(33.5)
2009*#
* Excluding valuation changes in the Strategic Portfolio
#
Unaudited figures
68
EXCHANGE FUND ABRIDGED BALANCE SHEET
At
31 Dec 2008
At
31 Dec 2007
172.8
132.9
1,151.3
922.9
92.9
184.6
Other equities
103.3
146.0
Other assets
40.0
28.0
Total assets
1,560.3
======
1,414.4
======
176.1
163.4
8.3
7.5
Balance of the banking system
158.0
10.6
Exchange Fund Bills and Notes
162.5
141.8
13.6
0.0
531.4
464.6
0.1
0.0
29.8
9.5
1,079.8
797.4
480.5
617.0
1,560.3
======
1,414.4
======
(HK$ billion)
At
30 Sep 2009*
ASSETS
Deposits
Debt securities
Hong Kong equities
LIABILITIES AND FUND EQUITY
Certificates of Indebtedness
Government-issued currency notes & coins in circulation
Placements by banks and other financial institutions
Fiscal Reserves Account
Placements by Hong Kong government/statutory bodies
Other liabilities
Total liabilities
Accumulated surplus
Total liabilities and fund equity
* Unaudited figures
69