HONG KONG 2004
Appendices *
Appendix 1 Appendix 2 Appendix 3 Appendix 4 Appendix 5 Appendix 6  
Appendix 6
TABLE Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 Table 7 Table 8 Table 9 Table 10 Table 11 Table 12 Table 13 Table 14 Table 15 Table 16 Table 17 Table 18 Table 19 Table 20   CHART Chart 1
Table 21 Table 22 Table 23 Table 24 Table 25 Table 26 Table 27 Table 28 Table 29 Table 30 Table 31 Table 32 Table 33 Table 34 Table 35 Table 36 Table 37 Table 38 Table 39 Table 40 Table 41   Chart 2
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Table 12
(Chapter 4: Financial and Monetary Affairs)
 
Exchange Fund Balance Sheet
HK$ Million
  As at end of year
  1999
   2003   2004  
Assets(1)            
  Foreign currency assets 755,115   929,625   969,341  
  Hong Kong dollar assets 247,641   82,020   92,513  
               
          1,002,756   1,011,645   1,061,854  
               
Liabilities(1)            
  Certificates of Indebtedness(2) 118,195   134,215   146,775  
  Government-issued currency notes and coins in circulation 5,777   6,297   6,351  
  Balance of the banking system(3) 7,960   28,277   15,789  
  Exchange Fund Bills and Notes 101,828   123,520   125,860  
  Placements by other HKSAR government funds(4) 392,206   252,296   280,091  
  Other liabilities(5) 85,932   82,161   63,397  
               
             711,898   626,766   638,263  
               
Fund Equity 290,858   384,879   423,591  
               
                     
 
 
Notes:
(1)
(a) Investment
The Fund is invested in interest-bearing placements with banks and other financial institutions both in Hong Kong and outside Hong Kong and in a variety of financial instruments, including bonds, notes, treasury bills and equities.
(b) Foreign currency assets distribution
A large proportion of the Fund's foreign currency assets is held in US dollars. Apart from the US dollar assets, the Fund also holds assets denominated in fully convertible foreign currencies.
(c) Location of assets
The assets are held in deposit, trustee and safe-keeping accounts with banks, central banks and custodial organisations situated in Hong Kong and other major financial centres.
(d) Valuation of assets and liabilities
Debt securities, equities and Exchange Fund Bills and Notes are valued in the accounts at market value at the balance sheet date. Placements with banks and other financial institutions, certificates of deposit, consideration received or paid under repurchase and resale agreements, securities lending agreements, placements by banks and other financial institutions, placements by other HKSAR government funds for which interest is payable at market-based rates and placements by Hong Kong statutory bodies are valued according to a price matrix of discounted cash flows using applicable interest rates for discounting. The consequential change in value of the asset or liability is reflected in the carrying value of the relevant asset or liability in the Balance Sheet except in the case of placements by other HKSAR government funds for which interest is payable at market-based rates, which are stated in the Balance Sheet at the principal amounts payable at the balance sheet date with the revaluation differences included in other liabilities. Placements by other HKSAR government funds for which interest is payable at rates determined by reference to the investment income of the Fund are stated at the principal amounts payable at the balance sheet date.
(e) Translation of foreign currency assets and liabilities
Assets and liabilities denominated in foreign currencies are translated into Hong Kong dollars at the rates of exchange ruling at the balance sheet date. Exchange gains and losses on foreign currency translation are included in the Income and Expenditure Account. Certificates of Indebtedness, government-issued currency notes and coins in circulation, all of which are denominated in Hong Kong dollars but are issued and redeemed in US dollars at the linked exchange rate of US$1=$7.80, are stated in the accounts at their Hong Kong dollar face value. At the balance sheet date the difference between their Hong Kong dollar face value and the market value of the US dollars required for their redemption is included in Hong Kong dollar assets.
:
(2)
As backing for the banknote issues, each note-issuing bank is required to hold a non-interest bearing Certificate of Indebtedness issued by the Financial Secretary. Payments for the issuance and redemption of notes against these Certificates are made in US dollars at the fixed rate of US$1=HK$7.80.
 
(3)
Under the interbank payment system based on Real Time Gross Settlement principles, all licensed banks maintain a Hong Kong dollar clearing account with the Hong Kong Monetary Authority for the account of the Exchange Fund. The aggregate balance in these accounts represents the total level of liquidity in the interbank market.
 
(4)
These represent placements by other HKSAR government funds with the Exchange Fund. Until 31 March 1998, all placements by other HKSAR government funds bore interest at market-based rates. With effect from 1 April 1998, the basis of interest payable on certain placements by other HKSAR government funds was amended from market-based rates to rates determined by reference to the investment income of the Fund.
 
(5)
Other liabilities include placements by banks and other financial institutions, placements by Hong Kong statutory bodies, interest payable on Exchange Fund Notes and placements by other HKSAR government funds, revaluation losses on off-balance sheet items which are marked to market, other accrued expenses and provisions and the revaluation differences of placements by other HKSAR government funds for which interest is payable at market-based rates.
Source: Hong Kong Monetary Authority.
(Enquiry Telephone No.: 2878 8222)
 
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