The Housing Authority had a fund balance of nearly $60 billion at the end of September, showing its financial position is strong with sufficient liquidity to meet operational needs despite the global economic turmoil.

This was the message from Secretary for Transport & Housing Eva Cheng while taking questions in the Legislative Council today. She said the authority's current investment strategy is to place 30% of its funds in bank deposits to cater for its liquidity requirements, 45% in global bonds and the remaining 25% in global equities.

The authority's investment return for 2006-07 reached 6.1%, which was higher than the 3.7% recorded for 2005-06 and 1.6% for 2004-05 when it had not made global investments.

Due to market fluctuation, the authority saw a $2 billion loss on equities and bonds in its investment portfolio for 2007-08. But after taking into account the income of $3.1 billion generated from interest, dividends and exchange gains, an overall investment gain of $1.1 billion was recorded in 2007-08, representing a 1.9% return.

The authority has drawn up a set of prudent investment guidelines for investment managers to prescribe the scope of allowable investments that exclude any high risk or leveraged investments.

In recent months the weighting of equities the authority holds has been kept below the target ratio of 25%, whereas the cash level has been above the target ratio of 30%. This helps reduce risk at a time of global market volatility, she said.

Ms Cheng emphasised the authority's flat production programme, being a component of the long-term housing policy, will not be revised because of a short-term fluctuation in investment income.