Yue sets record straight over headwinds

The heart and lungs will be transplanted in tandem.將同時移植心臟和雙肺。

Traditionally, stocks and bonds move in tandem = at the same time and in the opposite direction. When stocks go up, the value of bonds comes down.

However, as bonds become less valuable, their yields normally rise to partly compensate for the loss in valuation. By the same token, the opposite applies when stocks come down.

It is common to see stocks and bonds in a portfolio like that of the exchange fund, but what has surprised Yue is that this golden rule has broken.

Although stocks and bonds still moved in tandem, they headed in the same direction to create a stock-and-bond double whammy. Together with what is unfolding in the currency markets, the crisis expands to become a triple one.

HKMA has never disclosed the exchange fund portfolio in detail. Apart from US dollar-denominated assets, how many assets denominated in other currencies such as the yuan, euro or yen does it hold under the exchange fund?

As the US dollar continues to strengthen in anticipation of the Fed taking successive moves to increase interest rates by at least a half-point each time over the next few months, the exchange fund stands to suffer losses in non-US dollar assets due to exchange-rate changes.

Yue said he is going to counter the headwinds with four measures - these may narrow the risk exposure but they cannot buck the global trend.