At the end of May, the Exchange Fund's total assets were valued at $1.04 trillion, $3.8 billion lower than the previous month, the Monetary Authority says.

Foreign currency assets decreased by $6.8 billion while Hong Kong dollar assets increased by $3 billion.

The decrease in foreign currency assets was mainly due to the sale of foreign currencies for Hong Kong dollars. This was partly offset by income from foreign currency assets, and increases in repurchase agreements outstanding and securities purchased but settled in the following month.

Exchange Funds' HK equities rise in value

The rise in Hong Kong dollar assets was mainly due to the purchase of Hong Kong dollars from foreign currencies, an increase in bank borrowings, and valuation gains in the market value of Hong Kong equities held by the Exchange Fund.

These increases were partly offset by a decrease in the banking system balance and fiscal drawdowns.

The Currency Board Account shows that the monetary base at the end of May was $303.6 billion, a decrease of $19.9 billion, or 6.2%, from the end of April.

The drop was mainly due to decreases in the aggregate balance and in Certificates of Indebtedness.

Backing ratio increases slightly

The backing assets decreased by $20.1 billion, or 5.7%, to $335.7 billion.

The decrease was mainly driven by the corresponding decreases in the aggregate balance and in Certificates of Indebtedness in the monetary base together with revaluation losses on investments, which were partly offset by income from investments.