Nod of approval: Financial Secretary Henry Tang says Standard & Poor's decision to upgrade Hong Kong's foreign currency sovereign credit ratings represents an important recognition of Hong Kong's sound economic fundamentals, improved public finance and growth prospects.

Standard & Poor's has upgraded Hong Kong's foreign currency sovereign credit ratings by one notch, to AA-/A-1+ from A+/A-1, a move the Government welcomes.

Financial Secretary Henry Tang said the upgrade to double-A category represented an important recognition of Hong Kong's sound economic fundamentals, improved public finance and growth prospects.

Standard & Poor's recognised the significant improvement in Hong Kong's fiscal prospects driven by steady economic growth, continued recovery in asset markets, return to inflation and tighter spending control.

The upgrade in Hong Kong's foreign currency ratings was linked to the upgrade of China's foreign currency rating to A- from BBB+.

China's robust development reduces HK's risk

Standard & Poor's said the principal risk to Hong Kong - potential challenges that may arise from increased economic integration with the Mainland - had been reduced as a result of China's robust economic performance, sustained structural reform and overall strengthening of China's credit worthiness.

Meanwhile, it remains concerned about Hong Kong's narrow revenue base and indicated the introduction of a goods and services tax or other broad-based tax could potentially lead to a further upgrade in Hong Kong's ratings.

"The upgrade confirms improved growth prospects and the strong resilience of the Hong Kong economy, as demonstrated by our ability to weather numerous shocks over the past few years," Mr Tang said.

On the fiscal front, the Government remains committed to consolidating Hong Kong's public finances with continued fiscal discipline. It will also consider measures to broaden the revenue base.

"Looking ahead, Hong Kong's role as a major platform for intermediating trade, capital and ideas will be further enhanced with the wealth of opportunities presented by increasing economic integration with the Mainland," he added.

Seven HK institutions see rating increase

Standard & Poor's has also raised its long-term foreign currency ratings on seven of Hong Kong's leading companies and financial institutions to AA- from A+.

They are Kowloon Canton Railway Corporation, MTR Corporation, Airport Authority, DBS Bank (Hong Kong), Hang Seng Bank, Hong Kong Mortgage Corporation and Hong Kong & Shanghai Banking Corporation.