According to figures released by the Hong Kong Monetary Authority (HKMA) on Monday, the fund, which serves as the city’s financial war chest to defend the local currency, reported an investment income of HK$34.5 billion in the first three months of the year.
That’s 56 percent lower compared with the figure of HK$79.2 billion a year ago, and 34 percent down from HK$52.6 billion in the fourth quarter of 2025.
HKMA chief executive Eddie Yue said the January-March period had been rather “difficult” as the global equity market declined by almost 10 percent, following “huge volatilities” triggered by US-Israel attacks on Iran at the end of February.
By categories, investments in local stocks posted a loss of HK$5 billion – its second straight quarterly loss – and reversed gains of HK$16.4 billion year on year.
Investments from other equities logged losses of HK$11 billion, compared with gains of HK$15.3 billion in the fourth quarter of 2025.
By contrast, foreign exchange investment doubled from a year ago, posting gains of HK$25.9 billion thanks to changes in currency valuations.
Bonds, meanwhile, reported gains of HK$24.6 billion.
“There’s been a gain in the bond market investment partly because of the interest income, which offsets most of the bond price reduction we’ve seen over the quarter,” Yue said.
“And because of the weaker US dollar throughout the quarter, we’ve also seen the non-US dollar assets of the Exchange Fund recording a foreign exchange gain.
“In the end we’ve got HK$34.5 billion in income, which is actually understandable given the volatility of the financial markets.”
Looking ahead, Yue spoke about uncertainties in interest rate movements due to rising global oil prices and inflationary risks caused by the conflict in the Middle East.
“Depending on where the military conflict is going and how that is going to affect oil prices, they [the US Federal Reserve] may have to watch further how inflation, how prices change in the US before deciding their next move,” he said.
“Of course, the new Fed chair will come in very shortly, but for the new Fed chair and the Fed board of governors as a whole, they still need to look at all the different economic data in making their decisions… including inflation and employment.
“And in both areas, there are still uncertainties, so it’s a bit hard to predict where rates are going because of the huge uncertainties we are seeing now.”
The HKMA said HK$5.8 billion of the investment income will go to the government’s fiscal reserves.