Massive bond and equity profits push city’s financial war chest to its strongest nine‑month performance on record, as HKMA warns on looming market risks.
Record-breaking nine months for Hong Kong’s financial war chest
Hong Kong’s Exchange Fund has booked HK$274 billion (about US$35 billion) in investment income for the first three quarters of 2025, according to unaudited figures released by the Hong Kong Monetary Authority (HKMA) on Thursday, 13 November. [1]
It is the largest nine‑month gain since the HKMA began publishing such data in 2003, powered by a powerful market rally that boosted both bond and equity portfolios. [2]
The performance is not just strong — it is historic. The HK$274 billion haul:
- Exceeds last year’s nine‑month record of HK$239.1 billion, a jump of about 14.6 per cent; and
- Already beats the previous full‑year high of HK$264 billion set in 2017 — with three months of 2025 still to be booked. [3]
For a city that leans heavily on the Exchange Fund to defend the Hong Kong dollar and backstop the financial system, the numbers mark a major turnaround from the turbulence of recent years.
Where the HK$274 billion came from: bonds, stocks and currencies
The HKMA’s breakdown of the Exchange Fund’s performance shows gains across almost every major asset class in the first three quarters of 2025: [4]
By asset class (January–September 2025):
- Bonds: HK$112.6 billion in gains
- Hong Kong equities: HK$40.1 billion in gains
- Other (overseas) equities: HK$59.5 billion in gains
- Currency translation: HK$30.2 billion positive impact on non-Hong Kong dollar assets (after hedging)
- Other investments (e.g. alternatives, private assets): HK$31.6 billion in gains
The bond portfolio was the single largest contributor. Even though the US Federal Reserve began cutting interest rates in September, yields stayed relatively elevated, which meant the Fund continued to enjoy strong interest income on its fixed‑income holdings. [5]
On the equity side, both local and global stock markets delivered robust returns. The HKMA highlighted that Hong Kong’s stock market gained around 12 per cent in the third quarter alone, supported by capital inflows into the city’s bourse. [6]
The picture on currencies was more nuanced. For the first three quarters as a whole, currency moves added HK$30.2 billion to the Fund, but the HKMA noted that the US dollar’s strength in the third quarter actually created a translation drag on foreign‑currency assets over that specific period. [7]
“Other investments” — primarily longer-term and less liquid holdings such as private equity and infrastructure via investment subsidiaries — also contributed more than HK$30 billion in valuation gains, based on data available up to the end of June. Updated valuations for the third quarter are not yet included in the headline figure. [8]
IPO boom and AI-driven rally: why 2025 has been so favourable
Behind the impressive numbers is a change in global market mood.
According to coverage of the HKMA figures, a bull run in global equities and a revival in Hong Kong’s own stock market have been central to the Exchange Fund’s outperformance. [9]
Several factors have helped:
- Central bank policy shifts: Expectations of further rate cuts from the US Federal Reserve and other central banks have improved risk sentiment, even as the path remains uncertain. [10]
- Artificial intelligence and tech enthusiasm: The HKMA pointed to the global fervour around AI and technology shares, which has lifted major indices — and, by extension, the Fund’s overseas equity holdings. [11]
- Hong Kong equity rebound: Benefitting from fresh capital inflows, Hong Kong’s stock market has turned a corner, helping the Fund’s domestic equity book post sizeable gains. [12]
- IPO revival: Hong Kong has reportedly reclaimed the title of the world’s largest IPO market for the first time since 2019, as a wave of new listings has boosted trading volumes and valuations. [13]
Taken together, these trends have transformed the Exchange Fund from a cautious defensive pool into one of the standout institutional winners of 2025’s market rally.
The Exchange Fund’s balance sheet: bigger, stronger — and more profitable
The latest data show that the Exchange Fund is not just earning more — it is also getting larger.
- Total assets stood at HK$4.152 trillion at the end of September 2025, up about HK$71.2 billion from the end of 2024, an increase of roughly 1.7 per cent. [14]
- Accumulated surplus — essentially retained earnings since the Fund’s inception — reached HK$916.3 billion. [15]
The Fund also generates steady fee income for the public purse. In the first three quarters of 2025, it paid: [16]
- HK$12.3 billion in fees on placements by the government’s Fiscal Reserves; and
- HK$11.8 billion in fees on placements by other HKSAR government funds and statutory bodies.
These fees are calculated at a rate of 4.4 per cent for 2025, providing a reliable stream of income to support public finances. [17]
Why the Exchange Fund matters so much to Hong Kong
The Exchange Fund is not a typical sovereign wealth fund that simply chases returns.
Its core mandate is to support Hong Kong’s Linked Exchange Rate System — the currency peg that keeps the Hong Kong dollar trading in a tight band against the US dollar — and to safeguard the stability of the city’s monetary and financial systems. In practice, that means:
- Providing the firepower to intervene in FX markets when needed;
- Acting as a buffer during periods of market stress; and
- Investing the government’s fiscal reserves and other public funds for long‑term growth, subject to strict risk controls. [18]
The 2025 performance gives policymakers a larger cushion to deal with future shocks, whether they originate from global rate volatility, geopolitical tensions or a slowdown in major economies.
From deep loss to record gain: how far the Fund has come since 2022
The record 2025 figures look even more striking when set against the recent past.
In 2022, the Exchange Fund suffered an investment loss of HK$202.4 billion, as surging inflation, aggressive rate hikes and a simultaneous slump in global bonds and equities hammered asset prices. The Fund recorded a negative investment return of 4.4 per cent that year, one of its worst performances on record. [19]
By contrast, 2025 has unfolded as almost the mirror image:
- Global inflation has eased from its peak, allowing central banks to start shifting away from ultra‑tight policy.
- Bond yields, though still elevated, now generate healthy interest income instead of just mark‑to‑market losses. [20]
- Equity markets — especially tech‑heavy indices and AI‑related stocks — have rebounded sharply, feeding into both the Fund’s local and overseas portfolios. [21]
Earlier in the year, the Exchange Fund already posted a first‑quarter investment income of HK$67.2 billion, laying the groundwork for the blockbuster results now reported for the first three quarters. [22]
The swing from a huge loss in 2022 to a record gain in 2025 underlines just how sensitive the Fund is to global market cycles — and why the HKMA keeps stressing long‑term performance over any single year.
What this means for the Hong Kong economy and markets
A stronger Exchange Fund has several implications for investors, businesses and residents:
- More resilience for the currency peg
The larger the Fund, the more credible the defence of the Hong Kong dollar’s peg to the US dollar. In episodes of capital outflow or speculative pressure, the HKMA can comfortably deploy these reserves to stabilise markets. [23] - Support for government finances
Fee income on Fiscal Reserves and other public funds — already more than HK$24 billion for the first three quarters — provides extra budgetary breathing room, especially as the government continues post‑pandemic rebuilding and invests in long‑term infrastructure. [24] - Signal of improving market confidence
Strong returns on Hong Kong equities and the city’s return to the top of the global IPO league table hint at improving sentiment toward Hong Kong as an international financial centre. This aligns with recent data showing a double‑digit rebound in merchandise exports and imports in September 2025, suggesting external demand is firming. [25] - Potential halo effect for local asset prices
The same forces lifting the Exchange Fund — vibrant IPO activity, capital inflows and AI‑driven tech gains — also underpin valuations for listed companies, property developers and financial firms with heavy market exposure.
HKMA’s message: enjoy the gains, but stay cautious
Despite the eye‑catching numbers, the HKMA is not declaring victory.
Chief Executive Eddie Yue has emphasised that the investment environment remains highly uncertain for the rest of 2025. He pointed to: [26]
- Persistent worries over the US economic outlook, even as rate cuts are expected;
- The unpredictable impact of shifting US economic and trade policies;
- Ongoing geopolitical tensions; and
- The risk that asset prices could correct if optimism around AI or global growth fades.
In response, the HKMA says it will continue to:
- Put capital preservation first,
- Maintain high liquidity,
- Use defensive measures when needed, and
- Keep diversifying the Exchange Fund’s investments to enhance long‑term returns while guarding against shocks. [27]
In other words: the 2025 rally is being welcomed — but not chased recklessly.
Key numbers at a glance (January–September 2025)
| Metric | Figure |
|---|---|
| Investment income | HK$274.0 billion |
| Bonds | HK$112.6 billion gain |
| Hong Kong equities | HK$40.1 billion gain |
| Other equities | HK$59.5 billion gain |
| Currency translation | HK$30.2 billion positive |
| Other investments | HK$31.6 billion gain |
| Total assets (end‑Sep) | HK$4.152 trillion |
| Change vs end‑2024 | +HK$71.2 billion |
| Accumulated surplus | HK$916.3 billion |
| Fees on Fiscal Reserves | HK$12.3 billion |
| Fees on other govt funds/statutory bodies | HK$11.8 billion |
| Fee rate | 4.4% |
(All data from the HKMA’s unaudited Exchange Fund position at end‑September 2025.) [28]
What to watch next
Heading into the final quarter of 2025, several questions will determine whether the Exchange Fund can extend its winning streak:
- Will global rate cuts arrive smoothly, or will recession fears derail markets?
- Can Hong Kong maintain its momentum as a top global IPO hub into 2026? [29]
- How will geopolitical flashpoints — from trade disputes to regional tensions — affect capital flows into Asian assets?
For now, the numbers tell a clear story: Hong Kong’s Exchange Fund is enjoying one of its strongest years ever, giving the city more room to manoeuvre in an uncertain world.
References
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