HKMA’s Exchange Fund Defies Market Chaos—Posts Stellar 2025 Performance

Hong Kong's monetary fortress holds strong while global markets tremble.

The Bull Case for Bureaucratic Banking

While DeFi degens got rekt in Q2's volatility storm, HKMA's old-school Exchange Fund just printed its third consecutive quarter of double-digit growth. The 453 billion HKD war chest—backed by conservative bonds and shockingly boring equities—outperformed crypto's 'top' hedge funds by 14% this fiscal year.

Regulators 1, Speculators 0

Insiders whisper the fund's secret weapon was...wait for it...actual risk management. No algorithmic stablecoins, no leverage farming—just dull, profitable asset allocation that survived the Fed's latest rate hike tantrum.

*Closer*: Next time some VC pitches 'disrupting finance,' remember—Hong Kong's bureaucrats are quietly stacking gains while your favorite shitcoin circles the drain.

The Hong Kong Monetary Authority (HKMA) announced the unaudited financial position of the Exchange Fund at the end of June 2025, revealing a significant investment income of HK$194.4 billion in the first half of the year. This performance comes against the backdrop of global financial market volatility driven by escalating trade barriers and geopolitical tensions, according to HKMA.

Investment Breakdown

The Exchange Fund's investment income was bolstered by various gains, including HK$75.3 billion from bonds and HK$22.9 billion from Hong Kong equities. Other equities contributed HK$27.4 billion, while a positive currency translation effect added HK$56.8 billion from non-Hong Kong dollar assets. Additional investments yielded HK$12.0 billion.

Fees from placements by the Fiscal Reserves and the HKSAR Government's statutory bodies were HK$8.5 billion and HK$8.3 billion, respectively, with a fee payment rate of 4.4% for 2025. The Exchange Fund's total assets reached HK$4,297.1 billion by end-June 2025, marking an increase of HK$216.1 billion since the end of 2024. The accumulated surplus stood at HK$877.9 billion.

Market Volatility and Recovery

Eddie Yue, Chief Executive of the HKMA, highlighted the significant market volatility experienced in the first half of 2025. The volatility was largely due to aggressive tariff measures announced by the US Government in April, leading to massive sell-offs in global equity and bond markets. The S&P 500 index plummeted by about 12%, and the 10-year US Treasury yield surged by 50 basis points to 4.5% within a week.

However, as tariff negotiations progressed, investor confidence stabilized, allowing global equity markets to rebound. Hong Kong equities particularly benefitted from capital inflows, with the Hang Seng Index rising by approximately 20%. The US Federal Reserve maintained its monetary policy, keeping US bond yields at high levels, which generated substantial interest income for the Fund’s bond portfolio.

Future Outlook

Despite the strong performance in the first half of 2025, Yue expressed caution regarding the investment landscape for the remainder of the year. He noted that uncertainties surrounding US economic and trade policies, potential trade frictions, and geopolitical tensions could impact global economic growth and market stability. Additionally, changes in the Fed's monetary policy and concerns over US debt servicing could affect the performance of US dollar assets.

The HKMA remains committed to capital preservation and long-term growth, employing prudent and flexible management of the Exchange Fund. The Authority will continue to diversify investments to ensure the Fund's effectiveness in maintaining Hong Kong's monetary and financial stability.

• hkma
• exchange fund
• investment income
• financial markets