The following is the unedited transcript of the news release from Hong Kong Monetary Authority, HK

The Hong Kong Monetary Authority (HKMA) announced today that the total assets of the Exchange Fund amounted to HK$1,176.7 billion on 31 December 2006.

The figure is included in the Exchange Fund Abridged Balance Sheet, which is released monthly together with the Currency Board Account. The figures in the Exchange Fund Abridged Balance Sheet and the Currency Board Account are unaudited. The audit of the Exchange Fund’s annual accounts by the Director of Audit is in progress.

At the end of December 2006 the total assets of the Exchange Fund, at HK$1,176.7 billion, were HK$10.5 billion lower than at the end of November 2006. Foreign currency assets decreased by HK$5.3 billion and Hong Kong dollar assets decreased by HK$5.2 billion.

The decline in foreign currency assets was due mainly to valuation losses on foreign currency investments and a decrease in securities purchased but settled in the following month. These decreases were partly offset by an increase in Certificates of Indebtedness, and interest and dividend income from foreign currency assets. The decline in Hong Kong dollar assets was due mainly to a decrease in bank borrowings, which was partly offset by placements received from fiscal reserves and valuation of Hong Kong equities held by the Exchange Fund.

The Currency Board Account shows that the Monetary Base at the end of December 2006 was HK$298.0 billion, an increase of HK$6.2 billion, or 2.1%, from the end of November 2006. The rise was due mainly to increases in Certificates of Indebtedness and market value of Exchange Fund Bills and Notes outstanding. The former reflected the seasonal demand for banknotes around Christmas and New Year.

The Backing Assets increased by HK$5.5 billion, or 1.7%, to HK$332.7 billion. The increase was attributable mainly to the issuance of Certificates of Indebtedness in the Monetary Base together with interest from investments, which were partly offset by revaluation losses. Reflecting this, the backing ratio declined from 112.14% at the end of November 2006 to 111.65% at the end of December 2006.

Available at:

http://www.info.gov.hk/hkma/eng/press/index.htm