(Xinhua)
Updated: 2008-01-21 23:54

Hong Kong -- The investment income of Hong Kong's Exchange Fund grew 37 percent to a record HK$142.2 billion (US$18.2 billion) last year, with an 11.8 percent return rate, Hong Kong Monetary Authority announced Monday.

The main components of the investment income were a valuation gain on and dividends from the Hong Kong equities portfolio at HK$55. 8 billion; a valuation gain on and dividends from other equities at HK$6.7 billion, according to figures released by the authority.

The components also include an exchange valuation gain of HK$18.7 billion, mainly as a result of the appreciation of other currencies against the US dollar, and a total return from bonds and other investments of HK$61 billion.

After deducting interest and other expenses, the net investment income was HK$132.2 billion. The share attributable to fiscal reserves was HK$27.6 billion.

The total assets of the Exchange Fund rose from HK$1,176.4 billion at the end of 2006 to 1,417 billion at the end of 2007.

Hong Kong Monetary Authority Chief Executive Joseph Yam said at a press conference that the financial markets were extremely volatile last year especially in the second half of the year.

"Despite these sharp market fluctuations the Exchange Fund outperformed its benchmark by 126 basis points compared with 63 basis points in 2006. Most of this out-performance came from the Exchange Fund's holding of local equities," he said.

"Concerns about widening credit spreads, the profitability of financial institutions and the risks to US economic growth will continue to affect sentiment. Market volatility is likely to remain high given developments in international financial markets and likely continued macro-economic tightening on the Mainland," he said.   (US$1= HK$7.8025)