NEW YORK, May 15 /PRNewswire/ -- As part of the process of harmonising
ratings of Fitch IBCA and Duff & Phelps Credit Rating Co. (DCR), DCR has
raised the long-term foreign currency sovereign rating of the Special
Administrative Region of Hong Kong, People's Republic of China, from 'A'
(Single-A) to 'A+' (Single-A-Plus), and the long-term local currency sovereign
rating from 'A+' (Single-A-Plus) to 'AA+' (Double-A-Plus).
Hong Kong's sovereign ratings are well supported by the territory's strong
credit fundamentals. These include a solid record of fiscal management;
strong external liquidity position; a well-capitalized and regulated banking
system; adherence to the rule of law; and a competent and relatively
independent civil service administration. Hong Kong has strongly recovered
from the East Asian crisis, emerging with increased credibility of the Hong
Kong dollar link to the U.S. dollar, ample fiscal reserves at one-third of
GDP, and a growing international reserves position.
Continued financial reforms, such as the recent merger of the stock and
futures exchanges, plus China's likely entry into the WTO later this year will
enhance Hong Kong's position as an international financial services center.
In addition, this role has benefited from increased competitiveness due to
asset price deflation, including the near halving in property prices from mid-
1997 highs, which also reflects the flexibility of the economy. Increased
market confidence in the fixed currency peg should allow the Hong Kong dollar
to withstand any future depreciation in the Chinese renminbi.
Hong Kong's ratings remain constrained by Chinese sovereignty over Hong
Kong and the territory's economic links to the mainland. Stronger credit
fundamentals underlie Hong Kong's higher rating than China's, while the Basic
Law, the legal document that outlines the territory's status, gives it
considerable latitude over the conduct of economic policy. While China's
economic interests are directly tied to sustained international confidence in
Hong Kong, the potential for economic or political instability in China
remains a potential threat to the territory's ratings.
DCR became a subsidiary of Fitch IBCA on April 12, 2000, and it is
expected that the combined companies will merge by late May 2000. The
combined analytical staffs of the two agencies have been working to harmonise
the ratings and the rating approach of the new company. As part of this
process, analysts from Fitch IBCA participated with analysts from DCR as part
of the joint committee that determined this ratings action. It is not
expected that any further rating action will be taken when a single set of
ratings is issued at the merger of DCR and Fitch IBCA.
SOURCE Duff & Phelps Credit Rating Co.
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Related links:
http://www.dcrco.com
CONTACT:
Dr. Therese Feng, Ph.D., 212-908-0230,
feng@dcrco.com, or Roger M. Scher, 212-908-0240, scher@dcrco.com,
both of Duff & Phelps Credit Rating Co.
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