Political risk may harm territory's post-1997 outlook on a global stage

POLITICAL and currency risks help undercut any chance Hong Kong's debt market has of becoming more significant on the global scene, a prominent local banker said yesterday.

Patrick Thomas, managing director of boutique bank Oakreed Financial Services, said the territory's currency and the 1997 handover make any move to a bigger global presence unlikely.

The Hong Kong dollar was not an internationally traded currency, and the territory was limited both geographically and politically, particularly with 1997 looming, he said.

'Don't get me wrong,' Mr Thomas said. 'This is an excellent and highly successful market, but despite everything you will hear to the contrary, I believe it has very little to do with the development of a long-term domestic bond market geared towards institutional investors - except maybe as benchmarks.' He included currency risk under the heading of political risk 'because at some stage, probably in the very distant future - 50 years if the Basic Law is to be relied on - the Hong Kong dollar could disappear as a currency.

'It is conceivable that it could disappear earlier and it has to be seen therefore as a political risk,' Mr Thomas told the Asian Bond '94 conference.

Credit ratings were another factor in the political risk, he said. Virtually no certificate of deposit (CD) issues were specifically rated.