HKMA: Exchange Fund Records HK$134.7 Billion Investment Income in H1
Taylor Wilson
Hong Kong's Exchange Fund earned HK$134.7 billion in the first half of 2026, lifting total assets to HK$4.46 trillion. But HKMA Chief Executive Eddie Yue warned that AI valuations, Fed policy uncertainty, and geopolitical risks could make the second half far less generous.
Where did the HK$134.7 billion come from?
The biggest contributor was other equities — overseas stock holdings that returned HK$53.7 billion, driven largely by AI and semiconductor gains.
The bond portfolio added HK$49.1 billion, as elevated US dollar bond yields kept interest income steady.
A currency windfall helped too: the weaker dollar pushed up the Hong Kong-dollar value of non-HKD assets by HK$34.3 billion.
The sole drag was Hong Kong equities, which lost HK$11.8 billion. This means → the Fund made its money abroad; local stocks actually hurt overall returns.
HK$4.46 trillion in total assets — how big is this war chest?
Total assets reached HK$4,463.6 billion by end-June, up HK$302.4 billion in six months.
Accumulated surplus — profits saved over the years — stood at HK$862.7 billion.
In plain terms = this is Hong Kong's financial anchor, the reserve that backs the linked exchange rate and absorbs shocks. The thicker the cushion, the more room to ride out turbulence.
Where did the earnings go?
The Fund does not keep everything — it pays interest on the government's fiscal reserves at 4.8%, costing HK$10.9 billion in the first half.
It also paid HK$5.8 billion to government funds and statutory bodies.
This means → after these costs, the Fund's own retained profit is smaller than the headline, but those payouts themselves channel money back to the public purse.
What is the biggest risk for the second half?
Eddie Yue flagged three uncertainties: stretched AI valuations, an opaque Fed policy path, and geopolitical disruptions to supply chains.
AI-linked asset prices have already risen sharply; markets are watching for a correction that could ripple across other sectors.
The Fed has cut back on forward guidance — signaling less about its next move. This means → markets will react more sharply to each data release, amplifying volatility.
Can the first-half currency windfall last?
Yue specifically cautioned that the HK$34.3 billion foreign-exchange gain came from non-HKD assets rising in Hong Kong-dollar terms as the US dollar weakened.
In plain terms = exchange rates cut both ways — if the dollar rebounds in H2, that paper gain could reverse into a paper loss.
This reflects a structural reality: part of the Fund's return depends on currency moves, not purely on investment skill.
Content is for reference only, not financial advice.