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Enoch Yiu

The Exchange Fund, the war chest used to defend the local currency, reported a 37 per cent decline in first-half earnings as losses in Hong Kong equities and weaker bond returns weighed on performance, the Hong Kong Monetary Authority (HKMA) said on Tuesday.
Earnings stood at HK$134.7 billion (US$17.17 billion), down from the record half-year return of HK$214 billion in 2025.
The Hong Kong stock portfolio swung to a HK$11.8 billion loss from a HK$22.9 billion gain a year earlier.
The Hang Seng Index also fell 11 per cent in the first six months of 2026 amid worries over rising interest rates and corporate earnings.
“Despite brief periods of heightened market volatility in March due to geopolitical tensions in the Middle East, global market sentiment staged a notable recovery in the second quarter as tensions moderated,” said Eddie Yue Wai-man, chief executive of HKMA, in a statement.
“Despite losses on investments in Hong Kong equities due to the broad market decline, the Exchange Fund’s overall equity holdings achieved solid gains, driven by the strong performance in other equities.”
Bond income fell to HK$49.1 billion in the first half, down 35 per cent from HK$75.3 billion a year earlier.
We will also continue our investment diversification to strive for higher long-term returns, and ensure that the Exchange Fund remains effective in achieving its purpose of maintaining the monetary and financial stability of Hong Kong
Eddie Yue, chief executive, HKMA
Foreign currency translation gains dropped to HK$34.3 billion, down 40 per cent from HK$56.8 billion.
Overseas equities provided the bright spot, nearly doubling gains to HK$53.7 billion from HK$27.4 billion.
The second quarter delivered HK$90.8 billion in earnings, more than double the first quarter’s HK$43.9 billion.
The long-term investment portfolio, which invests in private equity and longer-term projects, booked a HK$9.4 billion gain in the first quarter.
The Exchange Fund traces its roots to 1935, backing the issuance of banknotes in the city and defending the Hong Kong dollar against speculative attacks. The HKMA, the city’s de facto central bank, invests the fund in Hong Kong equities and overseas stocks, global bonds, global real estate and other long-term projects.
The Exchange Fund paid a HK$10.9 billion fee for the government’s fiscal reserves in the first half, alongside HK$5.8 billion for other government funds, with the rate of return set at 4.8 per cent for the year. In the first half of 2025, it paid HK$8.5 billion for the fiscal reserves and HK$8.3 billion to other government funds.
Total assets reached HK$4.463 trillion at the end of June, up HK$302.4 billion from the end of 2025, with an accumulated surplus of HK$862.7 billion.
“Looking ahead to the second half, the global investment markets face multiple uncertainties,” Yue said, adding these included potential corrections in artificial intelligence-related assets.
“On monetary policy, the Federal Reserve’s policy path forward remains dependent on uncertainties around the inflation trends and labour market conditions in the US,” he said.
He said the HKMA will continue to invest prudently.
“We will also continue our investment diversification to strive for higher long-term returns, and ensure that the Exchange Fund remains effective in achieving its purpose of maintaining the monetary and financial stability of Hong Kong,” Yue said.


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Hong Kong’s Exchange Fund first-half earnings fall 37% on equity slump, softer bond income

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}HKMA warns of second‑half risks from potential AI asset corrections and uncertainty over the US rate path

HKMA warns of second‑half risks from potential AI asset corrections and uncertainty over the US rate path