Fitch Ratings has upgraded Hong Kong's long-term rating outlook to 'stable' from 'negative'. The international ratings agency has also affirmed the city's long-term foreign currency and local currency ratings at 'AA-' and 'AA+'.

Financial Secretary Henry Tang welcomed Fitch's move, adding the revision reflects international recognition of Hong Kong's sound economic fundamentals and improved growth prospects.

Mr Tang said the Government shares Fitch's view that it is important to restore fiscal stability over the medium term. He said the Government has put forward a clear and credible plan to restore fiscal balance by 2008-09 and is confident of its success.

Fitch said in a statement that the revision reflects a significant easing of deflationary pressures, sharply improved prospects for economic growth and diminished risks to Hong Kong's currency board framework.

The agency also noted Hong Kong's autonomy in economic and financial affairs has not been affected by recent political developments.