Hong Kong recorded a $2.6 billion surplus in its balance of payment account, at 0.8% of GDP, in this year's first quarter, compared to a surplus of $18.4 billion in last year's fourth quarter, the Census & Statistics Department says.

The surplus was underpinned by the buoyant export performance and continued net external factor income inflow leading to a still sizeable current account surplus.

Reserve assets grew by the same amount. Of the major balance of payment components, there was a current account surplus of $33.3 billion, at 10.6% of GDP, in this year's first quarter, smaller than that of $50.7 billion in last year's fourth quarter.

Visible trade deficit falls

The $33.3 billion surplus recorded in the current account was larger than the $16.6 billion of a year earlier. With goods exports growing faster than imports, the visible trade deficit fell to $19.7 billion, from $32.8 billion a year earlier.

The invisible trade surplus rose to $49.4 billion, from $43.2 billion in the same quarter last year, with exports of services having increased more than imports. Overall, a combined visible and invisible trade surplus of $29.8 billion was recorded, larger than the $10.4 billion in the same quarter last year.

Comparing this year's first quarter with the previous quarter, the visible trade deficit surged from $1.8 billion to $19.7 billion, while the invisible trade surplus fell from $53.8 billion to $49.4 billion. The net inflow of external factor income grew from $2.8 billion to $8 billion, while the net outflow of current transfers rose from $4.1 billion to $4.5 billion.

There was a sharp reversal from net inflow to net outflow in portfolio investment, sparked by local residents' increased holdings of overseas equity securities, and also by reduced flow of funds into the local stock market amid increasingly cautious investment sentiment towards the end of the quarter. This led to a marked increase in net outflow of financial non-reserve assets.

Sharp reversal

On portfolio investment flow, assets went up $77.5 billion and liabilities surged $6.7 billion. Taken together, there was a net portfolio investment outflow amounting to $70.8 billion, as against a net inflow of $53 billion in last year's fourth quarter.

A net outflow of financial non-reserve assets amounting to $49.2 billion, at 15.7% of GDP, was recorded, as compared with a net outflow of $15 billion in last year's fourth quarter.

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

Gross external debt amounted to $3.19 trillion, equivalent to 249% of GDP, at the end of March this year. Compared with the end of December last year, gross external debt went up $173.4 billion.

A major proportion of external debt was due to transactions of the banking sector, accounting for 67% of the total. The sector's external debt fell to $2.14 trillion, from $2.32 trillion at the end of December last year. Of this, 97.9% was short-term liabilities, of which 97.7% was held in the form of currency and deposits.