Fitch affirms Hong Kong at ‘AA+’, outlook ‘Stable’

Reuters is out with the latest statement from the US-based Fitch Ratings, affirming Hong Kong’s credit rating at 'AA+'; with Outlook Stable.

Key Points:

“Hong Kong's ratings are underpinned by its exceptionally strong public and external finances, high income levels, and a resilient and flexible economy. The ratings are principally constrained by the territory's deeper integration with lower-rated mainland China

The external environment has become more challenging in light of US-China trade tensions, prompting contractions in Hong Kong's export and import values yoy since late 2018, and a sharp decline in import and export-related employment.

Hong Kong's economy is vulnerable to further escalations in trade tensions because of its role as a global trade intermediary, but the agency does not believe rising tensions are likely to undermine the territory's fundamental external balance sheet strengths.

The Hong Kong dollar has remained near the weak-side of the convertibility band of 7.85 since mid-2018, resulting in numerous interventions by the Hong Kong Monetary Authority (HKMA) under the rules-based Linked Exchange Rate System, and prompting some market speculation that the viability of the currency regime could be at risk.

Growth has slowed considerably due to greater external challenges, decelerating global growth, and the resulting spillover to domestic demand. 

Fitch believes Hong Kong banks remain sufficiently resilient to challenges from slower economic growth and increased competition, due to their sound profitability, asset quality, liquidity and capitalization.”