HKMA commits $1bn to IFC’s debt platform

The Hong Kong Monetary Authority, the city's de facto central bank, has agreed to commit $1 billion to the International Finance Corporation's co-lending programme for emerging markets infrastructure.

The Managed Co-Lending Portfolio Programme, launched by the World Bank affiliate last July, originally aimed to mobilise $5 billion from global institutional investors to finance projects in emerging markets by 2021.

It has so far garnered around $1.5 billion from insurers, with Allianz Global investors, Prudential's Eastspring Investments and France's AXA Group each contributing up to $500 million to the scheme. The People's Bank of China was the programme's first partner, pledging $3 billion through the State Administration for Foreign Exchange, over the next six years.

The IFC is happy with the level of interest it has received from the market to date, with Jingdong Hua, IFC vice president and treasurer, saying the institution has “doubled the amount of financing available under MCPP to $6 billion”.

“Emerging markets present a broad array of untapped investment opportunities with good long-term growth potential. Joining hands with IFC allows long-term institutional investors like the HKMA to ride on the considerable expertise, experience and network of IFC in sourcing investable opportunities with proper risk management and governance framework. Together, we will support commercially viable projects in emerging markets,” said Norman Chan, chief executive of HKMA.

The investment will be made through HKMA's Exchange Fund, which holds $426 billion of the city's cash reserves. The fund invests a portion of its capital in alternatives, including infrastructure, through its Long-Term Growth Portfolio. “Noting the attractiveness of steady long-term returns in infrastructure investments, the HKMA has been active in expanding this new asset class for the Exchange Fund,” added Chan.

Eddie Yue, deputy chief executive of HKMA, wrote in a blog yesterday that it has made “good progress so far in its search for suitable [infrastructure] investment projects, with some projects coming close to fruition.”

Yue explained that the decision to foray into infrastructure follows its “in-depth research on infrastructure investment and concept crystallisation on its Infrastructure Financing Facilitation Office”. The IFFO, which was set up by the HKMA in July 2016, is a platform which aims to facilitate infrastructure investment through information exchanges among key stakeholders in the industry.