By Chen Weihua (China Daily)
Updated: 2007-08-22 15:05

The US subprime housing mortgage crisis that has triggered a global financial market panic will not heavily impact the Hong Kong economy, despite sharp stock drops in the last two weeks, say experts and government officials.

The crisis began when subprime mortgage defaults began to spiral, leading investors worldwide to shed their holdings. Global market sentiments have reached a record low, but market watchers and government officials in Hong Kong do not believe the crisis is a financial crunch.

The special administrative region's economic growth rose nearly 7 percent in the second quarter of 2007 as the city's economy continued to show "broad-based and above trend" expansion, according to the Census and Statistics Department, which indicated Hong Kong's gross domestic product (GDP) had accelerated to 6.9 percent over a year earlier, from a 5.7 percent increase in the first quarter.

Two senior special administration region (SAR) officials said Hong Kong residents should not panic because the city's economic fundamentals are still strong.

Financial Secretary John Tsang said the economy is on a sound track and urged investors to remain calm and rational in the choppy market.

"There are no structural risks in Hong Kong, although the stock market will remain volatile in the coming weeks," Tsang said.

Joseph Yam, the Hong Kong Monetary Authority's chief, said Hong Kong's financial system is stable and resilient.

"We've conducted tests and found the financial system is risk-resistant," he said.

The Hong Kong Monetary Authority, the city's banking regulator, said earlier it did not see the need to pump money into the banking system despite overwhelming cash injections by major banks across the world, designed to prevent a financial system seizure.

The Hong Kong Association of Banks, an alliance of prestigious banks in the SAR, has also said Hong Kong residents should not panic because the peaks and valleys mainly reflect global market changes.

"Following the subprime housing mortgage crisis, many giant financial institutions in the US are desperately trying to turn their investment holdings to cash, which results in broad sell-off fever," a spokesman from the Hong Kong Association of Banks said.

"As for Hong Kong, economic growth remains robust, helped by blue chip enterprises with favorable earnings and dynamic banking systems securing the city's economy," he added.

Hong Kong's economy expanded briskly in this year's second quarter, with GDP accelerating to 6.9 percent growth in real terms over a year earlier, up from a revised 5.7 percent in the first quarter.