XN000022-1996-07-31 — Page 2

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Exchange Fund figures

The Hong Kong Monetary Authority (HKMA) today (Wednesday) announced figures on Exchange Fund as at the end of June 1996. The figures, which are unaudited, show that:

the Total Assets of the Fund stood at $484.9 billion at end June, an increase of 5.3% from end 1995,

the Accumulated Surplus of the Fund stood at $161.6 billion at end- June, an increase of $1,520 million or 0.95% from end 1995, and

the underlying foreign currency reserves held in the Fund reached US$60 billion at end-June, the seventh largest in the world.

Commenting on the figures, Mr Joseph Yam, HKMA's Chief Executive said: "We are very satisfied with them. Despite less favourable market condition, we have continued to preserve and increase the Fund. The Fund is a major asset of the people of Hong Kong and I am pleased that we have once again increased the accumulated surplus to a new record level."

Mr Yam noted that while 1995 had seen rising prices in all the markets that the Exchange Fund invested in, the first half of 1996 had been much harder for investors in fixed income markets.

"The uncertainty in US interest rate movements and concerns that interest rates will rise have caused bond markets to shed much of last year's gains. The US dollar has also appreciated against the major currencies which affected the value of non-US dollar foreign currency assets held by the Exchange Fund. And the US equity market has lately also begun to show some price losses. Under these conditions, it is inevitable that the Exchange Fund will show smaller returns than the exceptional results we had in 1995. But by appropriate defensive action early in the year, we have managed to limit the impact of falling markets and preserve all of last year's gains," said Mr Yam.

On the prospects for the rest of 1996, Mr Yam declined to speculate on any future move in US interest rates but said that "the widespread market expectations that US interest rates will rise in the second half of the year will continue to influence the investment of the Exchange Fund. We shall maintain a relatively defensive position, in keeping with our conservative and prudent management style."