CONFIDENTIAL
FM HONG KONG
TO IMMEDIATE FCO
TELNO 1445
OF 081045Z SEPTEMBER 93
CONFIDENTIAL
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MDHIAN 4179
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INFO IMMEDIATE PEKING, UKREP JLG HONG KONG, WASHINGTON 8 SEP 1993
HONG KONG TELNO 1410 AND 1426: HONG KONG CREDIT RATING.
TING
1.
FOLLOWING IS AN UPDATE OF TUR.
2.
THE CONFERENCE CALL BETWEEN THE FINANCIAL SECRETARY AND S AND P STAFF TOOK PLACE AT 2100 HONG KONG TIME YESTERDAY (7 SEPT). THE APPEAL HAS SUCCEEDED IN REVERSING THEIR ORIGINAL DECISION AND LIFTING THE CREDIT WATCH APPLIED SINCE DECEMBER 1992. A MILDER FORM OF WARNING, 'NEGATIVE OUTLOOK', HAS REPLACED IT.
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3. S AND P HAS NOW AFFIRMED ITS SINGLE- A IMPLIED SENIOR
CURRENCY AND SINGLE -'A'-PLUS LOCAL CURRENCY RATINGS ON THE GOVERNMENT OF HONG KONG. THE RATINGS FOR MTRC FOREIGN CURRENCY DEBT AND LOCAL CURRENCY DEBT REMAIN AT SINGLE-'A'-AND SINGLE-'A'-PLUS RESPECTIVELY. THE 'A-1' SHORT-TERM RATINGS ON HONG KONG AND MTRC HAVE BEEN AFFIRMED.
4.
THE NEGATIVE RATINGS OUTLOOK REFLECTS THE RISK THAT BRITAIN AND CHINA MAY BE UNABLE TO COMPROMISE IN ONGOING TALKS OVER THE LEGISLATIVE ARRANGEMENTS FOR HONG KONG'S 1995 ELECTIONS BUT S AND P'S ANNOUNCEMENT HAS BEEN HELPFUL IN EMPHASISING THAT HONG KONG'S CREDIT-WORTHINESS IS LIKELY TO REMAIN STRONGER THAN CHINA'S BEYOND 1997. THIS REVERSES THEIR VIEW LAST WEEK THAT THERE SHOULD BE CONVERGENCE WITH CHINA WITH THE APPROACH OF 1997.
5. THE FACTORS SUPPORTING HONG KONG'S HIGHER RATING THAN CHINA RATED TRIPLE-'B' FOR FOREIGN CURRENCY DEBT AS STATED BY S AND P IN ITS PRESS RELEASE INCLUDE CHINA'S ECONOMIC SELF-INTEREST IN PRESERVING HONG KONG'S VITALITY EVIDENCED BY PROGRESS ON THE AIRPORT NEGOTIATIONS, THE AUTONOMY PROVIDED BY THE BASIC LAW, AND HONG KONG'S STRONG NET INTERNATIONAL CREDITOR POSITION AND DYNAMIC ECONOMY.
PATTEN
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