(Bloomberg) -- Hong Kong’s wealth fund suffered a HK$202.4 billion ($25.8 billion) record loss in 2022, hurt by a selloff in stocks and bonds as interest rates rose. 

The Exchange Fund lost HK$80.7 billion on its portfolio of domestic and foreign stocks while its shortfall on bonds was HK$53.3 billion, the Hong Kong Monetary Authority said Monday. The heavy losses came even as the fund saw a gain of HK$76.4 billion in the fourth quarter. 

“Looking ahead in 2023, financial markets will continue to face significant uncertainties and asset prices are expected to remain volatile,” HKMA Chief Executive Eddie Yue said on Monday. “The monetary policies of major central banks will continue to dominate the investment outlook, and financial markets will pay close attention to peak policy rates set by major central banks.” 

The HK$4 trillion fund was rocked last year by a global stock slump and rising interest rates. The losses come as the city is seeking to revive after years of strict Covid controls that have crippled the local economy.

H.K. Exchange Fund Increased Cash, Floating-Rate Bond Holdings

During 2022, the performance of the main components of the Exchange Fund was: 

• Equities —
  • Hong Kong equities: lost HK$19.5 billion
  • Other equities: lost HK$61.2 billion
• Bonds — lost HK$53.3 billion
• FX — negative currency translation effect of HK$40.1 billion on non-HKD assets
• Other investments: HK$28.3 billion
• Investment return: -4.4%; second worst year after -5.6% in 2008

The fund helps backstop the former British colony’s fixed exchange rate regime, drawing on it to defend the Hong Kong dollar’s peg to the greenback. 

What the Hong Kong Dollar Peg Is and Why It Matters: QuickTake

(Updates with more figures and chart)

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