The Exchange Fund has posted an investment loss of HK$13.2 billion in the three months ending September, its first quarterly loss in 18 months.
The Hong Kong Monetary Authority said on Monday the quarterly loss was due mainly to a HK$26.3 billion loss in local equities. It said changes to regulatory policies on the mainland have had an impact on the Hang Seng Index, which dropped almost 15 percent.
"External markets and the mainland economy etc all play a very vital role in the equity market. And corrections and policies in the mainland market somewhat affected our local equity market," said Howard Lee, HKMA's deputy chief executive.
"There is not a single deciding factor... For example, the recent power shortage in the mainland also sparked concern in the local equity market for some sectors."
Lee said people should take a long-term view and not focus on the fund's performance in one quarter alone.
For the first nine months of the year, the fund – the investment portfolio that is used to back the Hong Kong dollar – posted an investment income of HK$126.5 billion.
That's higher than the HK$90.8 billion recorded in the same period a year ago.
HKMA's chief executive Eddie Yue said it's hard to predict the fund's performance in the fourth quarter, saying it depends on the global economic situation, how the pandemic evolves and the outcome of a meeting by the US Federal Reserve in November.
"The market is expecting that there is a chance that the Fed might announce a reduction or tapering of their bond purchases at their next meeting. And the inflation number and the employment number will affect whether they are going to do that, and what messages they will bring in terms of their monetary policy stance going forward," Yue said.
"What reaction that will bring to the market in general, and also to the capital flows coming in and out of Asia in particular or emerging markets more generally, we will have to watch the developments."