The following is issued on behalf of the Hong Kong Monetary Authority:

Hong Kong Exchange Fund Totals US$199.7 Billion

For more information, please contact:
Melissa Ng /David Hsieh at 212-752-3320
Daniel McAtee at 202-238-6360
Wing Yan Tong at 415-835-9315

January 23, 2009 - Total assets of the Hong Kong Exchange Fund amounted HK$1,557.7 billion (US$199.7 billion) on December 31, 2008, according to the Hong Kong Monetary Authority (HKMA). This is HK$131.6 billion (US$16.87 billion) higher than at the end of November 2008.

Foreign currency assets increased by HK$129.9 billion (US$16.65 billion) and Hong Kong dollar assets increased by HK$1.7 billion (US$217.94 million).

The rise in foreign currency assets was due mainly to purchases of foreign currencies with Hong Kong dollars and valuation gains on foreign currency investments.

The rise in Hong Kong dollar assets was due mainly to increases in the balance of the banking system and bank borrowings. These increases were substantially offset by the sale of Hong Kong dollars for foreign currencies and fiscal drawdowns.

The Currency Board Account shows that the Monetary Base at the end of December 2008 was HK$506.6 billion (US$64.94 billion), an increase of HK$88 billion (US$11.28 billion), or 21%, from the end of November 2008. The rise was due mainly to increases in the Aggregate Balance and Certificates of Indebtedness. The latter reflected the seasonal demand for banknotes around Christmas and New Year.

The Backing Assets increased by HK$93.8 billion (US$12.02 billion), or 20.4%, to HK$554.6 billion (US$71.1 billion). The increase was attributable mainly to an increase in the Aggregate Balance and issuance of Certificates of Indebtedness in the Monetary Base together with revaluation gains and interest from investments. At the end of December 2008, the backing ratio stood at 109.48%, compared with 110.09% at the end of November 2008.

While the magnitude of increase in the Backing Assets was more than the Monetary Base, the proportionate increase in the former is smaller than that in the latter. The backing ratio, therefore, declined to 109.48% at the end of December, compared with 110.09% a month ago.