Hong Kong's Global Status Not Much Affected By Turmoil So Far - Fitch

Tom Burroughes

16 December 2019

Political unrest in Hong Kong hasn’t greatly hit Hong Kong’s standing as a global centre even though there are short-term pressures, according to , the global rating agency. However, continued turmoil affects how the jurisdiction is perceived, it said.

The agency has a Negative Outlook on Hong Kong's 'AA' rating, it said in a statement late last week.

“Hong Kong's short-term economic outlook continues to deteriorate. Fitch now expects the economy to shrink by 1.5 per cent in 2019, with tourism, retail, hotels and catering, and air transport among the sectors most severely hit. Meanwhile, real-estate transaction volumes have dropped sharply, and residential property prices are down roughly 5 per cent from their May 2019 peak,” the agency said in a statement. “Growth in 2020 could improve slightly, supported by the HK$25 billion of fiscal relief measures (0.9 per cent of GDP) announced since mid-August, but the economic outlook remains vulnerable to lingering social unrest.”

Protesters have clashed with authorities since the early summer of this year, initially angered by moves by the former UK colony – now a Chinese jurisdiction – to extradite criminal suspects for trial in the mainland. At stake is whether Hong Kong’s legal autonomy, which is crucial for its standing as a financial centre, will endure.

Fitch said “some indicators” give a positive picture of Hong Kong's medium-term prospects and cited Alibaba's recent listing on the Hong Kong stock exchange as an example of the territory's role as the flagship off-shore financing centre for Chinese firms. Fitch said that Hong Kong’s status will be further solidified by rising US-China geopolitical tensions and the enduring widespread deployment of capital-account restrictions on the mainland.

“In fact, despite the unrest, Hong Kong's equity and debt capital fundraising in 2019 remains broadly in line with the average over the preceding three years. Meanwhile, data for banking-sector deposits (both the Hong Kong dollar and foreign currency), business registrations and employment visas show little evidence that the territory's role as a centre for global commerce has diminished,” it said.

Lawyers have told this publication that expats living in Hong Kong, and some residents able to do so, are looking at moving some assets out of the jurisdiction and exploring ideas such as relocating themselves and families. However, so far there hasn’t been a rush of exits.