S&P affirms AA+/A-1+ issuer credit ratings on Hong Kong with stable outlook

HONG KONG -- International credit rating agency Standard & Poor's (S&P) has affirmed its AA+/A-1+ issuer credit ratings on Hong Kong and maintained the outlook as stable.

S&P Global Ratings affirmed on Friday its AA+ long-term and A-1+ short-term issuer credit ratings on Hong Kong. The outlook remains stable, and the transfer and convertibility assessment is unchanged at AAA, the agency announced in its latest report on Hong Kong.

It said Hong Kong's economy will likely suffer another deep contraction this year as the COVID-19 pandemic has increased pressure on the services and trade sectors, and the fiscal deficit is expected to widen with the roll-out of additional fiscal stimulus.

"But for now fiscal buffers remain sufficient to absorb the credit impact of these measures," it pointed out.

The stable outlook reflects S&P's expectation that economic conditions will stabilize and recover from the COVID-19 pandemic and that political developments between the Chinese mainland and Hong Kong Special Administrative Region (SAR), as well as between the United States and Hong Kong SAR, will not fundamentally jeopardize Hong Kong's economic development, it said.

"The stable outlook reflects our expectation that Hong Kong's strong economic and financial metrics will still allow the government's creditworthiness to withstand the fallout from prolonged social tensions and the COVID-19 pandemic over the next one to two years," it said.

"It also reflects our expectation that institutional changes as a result of the impending national security legislation will not affect Hong Kong's autonomy in setting economic policies as laid out in the Basic Law," it added.

Under the "one country, two systems" principle, Hong Kong enjoys autonomy in important institutional matters that affect the government's creditworthiness, including the ability to manage its own finances and set macroeconomic, financial and trade policies, it said.

"We continue to expect the central government of China and the territory's government to maintain Hong Kong's autonomy in these matters, as outlined in the Basic Law."

S&P said it does not expect any changes to trade relations between the United States and Hong Kong SAR to seriously jeopardize the territory's financial sector development and economic growth.