Hong Kong's Exchange Fund saw its investment gains reach a record high of HK$331 billion in 2025, as a bull run in the stock market as well as interest rate cuts helped boost the city's financial war chest used to defend the local currency.

The gains were 51 percent higher compared with the HK$218.8 billion recorded in 2024.

It came as the global financial market stabilised in the second half of last year, after the impact from US tariffs was smaller than expected, while a global rally in artificial intelligence also drove up capital flows.

"Overall, 2025 was an exceptional year, where every major component of the Exchange Fund achieved positive returns, contributing to a record high investment income," Eddie Yue, chief executive of Hong Kong Monetary Authority (HKMA), told reporters at a press briefing on Wednesday.

"This is uncommon and has occurred only twice over the past 15 years, in only 2017 and 2020," Yue added.

By categories, the fund's stock investment income for the entire year stood at HK$108 billion, with gains from local equities totalling almost HK$34 billion and that from overseas stocks standing at HK$74.1 billion.

Bond investment income stood at HK$142.2 billion, while foreign currency gains hit HK$38.4 billion and other investments reached HK$42.4 billion.

The annual investment return rate stood at 8 percent for last year, and that the investment portfolio achieved a real return of 12.4 percent.

But Yue warned about the outlook in 2026, saying factors that shaped the strong performance of 2025 might not repeat themselves this year.

"Factors such as global economic conditions, monetary policies of major central banks, developments in AI, and geopolitical conflicts could all affect market performance," he said.

"And if market conditions deteriorate, we may see significant market fluctuations."

Howard Lee, chief executive of the Exchange Fund Investment Office at the HKMA, cited uncertainties such as the state of the US economy and AI investments.

"All the talk about AI, we are seeing that AI and related industries have been providing a very strong support and impetus for the valuation of the stock market in the past two years," he said.

"But whether this kind of enthusiasm about AI investment will continue or whether there would be some adjustments, there's a lot of talk in the market, which could well have major implications on the overall performances of the equity markets."

Yue said the HKMA would adhere to its principle of "capital preservation first while maintaining long-term growth" in light of the "complex and volatile investment" landscape.