Hong Kong's balance-of-payments account recorded a deficit of $20.5 billion, or 6.3% of GDP, in the third quarter, as compared to $8 billion, or 2.6% of GDP, in the second. Reserve assets fell by the same amount.

At the end of September, the Government's external debt amounted to $12.6 billion, 98.8% ($12.4 billion) of which was long-term liabilities. This was mainly attributable to the non-residents' holdings of Government-issued debt securities.

The current-account surplus widened considerably to $53.3 billion, or 16.2% of GDP, in Q3, much larger than that of $7.2 billion, or 2.3% of GDP, in Q2.

At the same time, a net outflow of financial non-reserve assets amounting to $56.6 billion, or 17.3% of GDP, was recorded, as compared with a net outflow of $39.1 billion, or 12.6% of GDP, in Q1.

The balance-of-payments deficit in Q3 was due to a continued net outflow of financial non-reserve assets, which in turn was mostly a result of a marked rise in outward direct investment by local enterprises to expand their businesses outside Hong Kong amid a generally upbeat global economic environment.

Inward direct investment into Hong Kong rose in the quarter. While there was a modest withdrawal of funds from the banking sector after the enormous inflows in the preceding quarters, net outflow of portfolio investment dwindled markedly in Q3 upon resumed funds inflow into the local stock market and the Government's bond offering to overseas investors.

At the same time, the current-account surplus remained sizeable, on the back of robust performance in exports of both goods and services.

Hong Kong's external debt position remained sound, with a predominant share of its debt associated with normal operations of banks and with inward direct investment.

Hong Kong's direct investment abroad rose $91 billion and foreign direct investment in Hong Kong rose $85.5 billion during Q3, resulting in a net direct investment outflow of $5.5 billion, as against a net direct investment inflow of $27.3 billion in Q2.

On portfolio investment flow, assets rose $58.6 billion and liabilities rose $17.1 billion in Q3. Taken together, the resulting net outflow was $41.5 billion, compared to $106.6 billion in the previous quarter.

The rise in portfolio investment assets was due to increased holdings of non-resident equity securities and debt securities by Hong Kong residents. The rise in portfolio investment liabilities was mainly attributable to increased holdings of resident debt securities by non-residents.