Renminbi securities in portfolios of official institutions : a perspective from the Hong Kong Monetary Authority

The management of central bank reserves is a subject in which best practice does not remain constant but is continually evolving. As markets develop and overall levels of central bank reserves have grown, so the task of managing them has changed and become more complex. New instruments have been added to the universe of acceptable assets, and more markets have become open and investable for international investors. For a number of countries the reserves have become a significant national asset and potential income generator that needs to be invested wisely and profitably, and public scrutiny of the activities of central bank reserves managers in these countries is both legitimate and important. Even for countries whose reserves are more policy-orientated and less a store of national wealth, the reserves management function has often grown in significance, and today’s reserves managers have responsibilities to their own senior management, to their wider national public, and to markets and other market participants. The traditional trilogy of objectives of "Security, Liquidity and Return" that has guided reserves managers over the years is still valid. But it needs updating and extending for today's more complex and multi-faceted challenges. This chapter seeks to do so.