Hong Kong retains AA+ rating and stable outlook from Fitch

City has a resilient and flexible economy.

Fitch Ratings has affirmed both Hong Kong's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'AA+'. The Outlook is Stable. The agency also affirmed the Short-Term Foreign-Currency IDR at 'F1+' and Country Ceiling at 'AAA'.

Fitch said the affirmation of the ratings reflects Hong Kong’s resilient and flexible economy and very strong public and external finances. These factors plus the periodic implementation of macro-prudential measures help mitigate risks associated with increasing financial exposure to China and high domestic real-estate prices.

Hong Kong has not followed the recent slowdown in China's economy. Its real GDP grew 3.3% on-year in Q2 compared to 2.9% in Q1. Hong Kong's supply-side flexibility is an important buffer against shocks.

Hong Kong's public finances remain among the strongest in the high-grade sovereign universe as it recorded its eighth consecutive annual budget surplus of 3.1% of GDP in the fiscal year ending March 2013.

As a result, Hong Kong's fiscal reserves rose to 35.6% of GDP (or 23 months of government expenditure) at end-March 2013, which in turn continues to support the viability of the Linked Exchange Rate System.

The Stable Outlook reflects Fitch's assessment that upside and downside risks to the rating are currently well-balanced.