LEHMAN Brothers' new report on Hong Kong affirms its strong single-A rating and says uncertainty over its political future should not hurt its sovereign risk.
Senior vice-president and credit research manager Stephen Taran said doubts over Hong Kong's political outlook 'should not detract from its very strong sovereign risk rating, nor diminish the territory's appeal as a place to do business, invest in equity or extend credit'.
'We continue to rate Hong Kong's sovereign risk at single-A, one notch higher than our A-minus rating for China,' Mr Taran said.
'Given the negative headlines being generated by the current uncertainty about Hong Kong's political future, we think it would be useful to review the basis for our continued positive sovereign ratings outlook for the territory.' He downplayed suggestions from other analysts that if China was hit by an economic crisis, it might take Hong Kong's foreign exchange reserves.
'Apart from the fact that such action would contravene the Basic Law, which says that Hong Kong shall not transfer funds to China, it is hard to imagine a more short-sighted approach, given China's large and growing interests in Hong Kong and the devastating effect that such a move would have on Hong Kong's economy,' Mr Taran said.
He said Hong Kong's economic, social and political characteristics were comparable to countries carrying an AA rating.