S&P affirms Hong Kong credit ratings, sees strong growth over three years

HONG KONG - Standard & Poor's has affirmed its 'AAA' long-term and 'A-1+' short-term issuer credit ratings on Hong Kong, and says the rating outlook remains stable, reflect the economy's above-average economic growth prospects for a high-income economy, healthy fiscal performance, sizable fiscal reserves, and strong external position.

“The main credit constraints are the limited monetary flexibility inherent in a pegged foreign exchange rate regime and the risks associated with economic and political links with the lower-rated People's Republic of China (AA-/Stable/A-1+; cnAAA/cnA-1+),” S&P says.

“Hong Kong's economy is likely to grow faster than the average of high-income economies over the next three years. This forecast assumes resilient local demand, a gradual recovery in advanced economies, and China maintaining economic growth close to 6% annually.

“In particular, the SAR's role in facilitating China's economic and financial integration with the rest of the world should continue to support Hong Kong's financial sector, an important growth engine of its economy.”
However, S&P says, increasing economic and administrative integration with the Mainland also increases Hong Kong's exposure to economic developments and administrative measures in China. “Given these economic and political linkages, the ratings on the two governments, while different, cannot be detached.

“We could lower the ratings if Hong Kong's political polarisation worsens to a point where it compromises policymaking and the business environment. A downgrade of China may also lead us to lower our ratings on Hong Kong.” www.standardandpoors.com (ATI).