Hong Kong’s search for higher returns leads Exchange Fund down risky belt and road plan
- The city’s de facto central bank has proposed using cash from the Exchange Fund to back infrastructure projects under Beijing’s ‘Belt and Road Initiative’
- The Exchange Fund is expected to announce its first quarterly loss in two years as global stock markets take a nosedive
The Exchange Fund, Hong Kong’s war chest of roughly HK$4 trillion (US$500 billion) in reserves, is about to report its first quarterly loss in two years as stock markets around the world tank, according to analysts.
The gloomy prediction comes as the city’s de facto central bank mulls the idea of seeking higher, longer term returns by using part of the fund to back infrastructure projects under Beijing’s “Belt and Road Initiative”.
But that proposition is facing criticism from some brokers and lawmakers, who say it is far too risky and ultimately would not guarantee better investment returns.
HKMA chief executive Norman Chan Tak-lam will report to lawmakers on November 5 on the fund’s results for the third quarter and the first nine months of the year.
“The Exchange Fund is likely to report a loss for its third-quarter investment return as its portfolio has been hit hard by the Hong Kong stock market slump,” said Gordon Tsui Luen-on, managing director of Hantec Pacific.
