Hong Kong's half-trillion-dollar investment fund set up to defend the financial hub's currency has suffered its largest loss on record of more than HK$200 billion ($25 billion), authorities said Monday.

The Exchange Fund, the semi-autonomous Chinese city's de facto sovereign wealth fund, is one of the largest public investment vehicles in the world.

Its slump last year was only the third loss since Hong Kong's Monetary Authority (HKMA) began disclosing the fund's annual performance in 2000.

The de facto central bank attributed the unprecedented deficit, the first since 2015, to "an exceptionally volatile year" in global financial markets.

"This investment environment... has also marked 2022 as the only year in almost half a century during which returns from equities, bonds and major currencies against the US dollar all recorded negative returns simultaneously," HKMA Chief Executive Eddie Yue told reporters on Monday.

Yue said he expected the fund to continue facing significant uncertainty in 2023 amid continued tightening of monetary policy, lowered economic growth and geopolitical tensions.

"On a more positive note... the mainland (Chinese) economy may rebound strongly this year," he added, boosting the appeal of bond investments.

Founded in 1935, the Exchange Fund has been the city's war chest to defend the Hong Kong dollar against short-sellers and maintain its peg to the greenback.

Last year, under short selling encouraged by hikes in US interest rates, the HKMA spent more than HK$220 billion over six months to support the local currency.

At the end of last year, the fund held more than HK$4 trillion ($500 billion) in assets.

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