HKMA official says mainland bonds performed well, cautious distribution to continue
Hong Kong Monetary Authority Deputy Chief Executive Li Dazhi said mainland Chinese government bonds have performed well, with a return rate of about 7 per cent last year, and the authority will continue to invest cautiously. He noted increasing difficulty in portfolio diversification due to heavy co
A legislator at the Legislative Council's Panel on Financial Affairs asked whether the Exchange Fund would adjust its bond asset allocation, given that yields on European and US government bonds have risen sharply recently while mainland Chinese government bond yields have remained stable.
Hong Kong Monetary Authority (HKMA) Deputy Chief Executive Li Dazhi said the authority's investments in mainland Chinese government bonds in recent years have performed well. Although yields have declined, bond values have risen and the authority has also recorded exchange gains. The return rate on mainland Chinese government bond investments last year reached about 7 per cent, which he described as quite good. The HKMA will continue to distribute its investments cautiously in the future, he said.
Li cited the Exchange Fund's early investments in the renminbi as an example, saying the fund was attracted by the lower correlation between the Chinese market and other overseas markets. He stressed the importance of ensuring that different assets can provide a certain level of protection across different economic cycles.
The market currently expects the US Federal Reserve to raise interest rates once more this year, Li said, but market sentiment can shift very quickly. The authority will continue to adjust monetary policy based on local economic conditions, inflation and data changes. He emphasised that as a large institutional investor, the HKMA cannot simply "gamble" or enter and exit markets frequently. It must ensure proper risk distribution and diversification of investments.
However, Li acknowledged that achieving portfolio diversification is becoming increasingly difficult. Global equity investment allocation is now heavily concentrated in US stocks, even focusing on the largest stocks by market capitalisation. He said the authority needs to further consider whether its investment portfolio is sufficiently diversified.