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2008 Exchange Fund Results

2008 Exchange Fund Results. Press Conference 21 January 2009. Investment Objectives of The Exchange Fund. Investment objectives of the Exchange Fund: (1) to preserve capital;

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2008 Exchange Fund Results

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  1. 2008 Exchange Fund Results Press Conference 21 January 2009

  2. Investment Objectives ofThe Exchange Fund Investment objectives of the Exchange Fund: (1) to preserve capital; (2) to ensure that the entire Monetary Base at all times will be fully backed by highly liquid US dollar denominated assets; (3) to ensure sufficient liquidity for the purpose of maintaining monetary and financial stability; and (4) subject to (1) – (3), to achieve an investment return that will preserve the long-term purchasing power of the Fund.

  3. Markets in 2008 • Exchange rates: • US dollar strengthened sharply in the second half of 2008 against euro but weakened against yen • Equity markets: • Major markets experienced one of the worst slumps in history • Major indices dropped around 30-50% • Interest rates: • Aggressive easing by major central banks • Capital seeking safe haven flooded to sovereign bond markets • Government bond yields reached historical lows in the fourth quarter of 2008

  4. Investment Income * Unaudited figures ^ Including dividends # Including interest @ Excluding valuation changes in Strategic Portfolio

  5. Change in Investment Income, Payment to Treasuryand Accumulated Surplus # The fixed rate of fee payment to Treasury for 2008 is 9.4% and 7% (w.e.f. 1 April 2007) for 2007. ^ Including dividends

  6. Historical Change in Investment Income, Payment to Treasury and Accumulated Surplus * Unaudited figures ^ Including dividends

  7. Exchange FundAbridged Balance Sheet

  8. Investment Returnof the Exchange Fund Compounded Annual Investment Return (1994-2008) Compounded Annual Hong Kong CPI-A (1994-2008#) # Hong Kong CPI-A at end-November 2008

  9. Exchange Fund Performance Against Investment Benchmark

  10. Payment to Treasury Against Estimate

  11. Outlook for 2009 Outlook for global financial markets remains cautious: • effectiveness of monetary easing policy and huge stimulus packages by major central banks and governments to restore confidence in their respective economies is yet to ascertain • significant decline in corporate profits and consumption • potential overhang from the de-leveraging bank balance sheets and further write-downs of toxic assets

  12. 2008 Exchange Fund Results Press Conference 21 January 2009

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