HK economy safe from US credit downgrade: official

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Financial Secretary of Hong Kong John Tsang said Monday that the downgrade of U.S. sovereign debt will have little impact on U.S. treasury yields, U.S. dollar exchange rate and Hong Kong's economy.

Tsang told the media the downgrade of U.S. credit rating from AAA to AA+ by Standard and Poor's was expected. He said the downgrade will bring fluctuation to the market. However, he said the U.S. dollar remains the world's main currency.

Tsang said most Asian economies are stable, which will support Hong Kong. He emphasized Hong Kong's economic fundamentals are strong against external fluctuations. The results of the regular stress tests for banks and financial institutions show the industry is capable of responding to market fluctuations.

When asked if there will be another financial crisis, Tsang said he will observe the response of other countries, adding European countries are making contingency plans.

He said now is a good opportunity to strengthen Hong Kong as a renminbi center.

The local government will monitor global developments and the local market to ensure its smooth operation. He advised small investors to beware of market fluctuations, to exercise caution and act sensibly.

Chief Executive of the Hong Kong Monetary Authority Norman T. L. Chan also responded to the downgrade on Monday, saying it should not affect U.S. dollar's position as a major pricing and settlement currency in international trade and financial markets.

The downgrade reflects the market concern on the determination and ability of the U.S. government to pursue fiscal consolidation in the medium to longer term, Chan said.

He expected that there would continue to be significant market volatilities going forward, given the present unfavorable economic and financial conditions in Europe and the U.S.h It will be crucial that the authorities in Europe and the U.S. will take further steps to allay the concerns of the market by implementing bold fiscal plans and other appropriate measures, he said, adding Hong Kong should continue to strengthen the resilience of its financial system to cope with such volatilities.