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Following is the transcript of the media session by the Financial Secretary, Mr Antony Leung, in response to the reaffirmation of Hong Kong's credit rating by the Moody's Investor Service at the Central Government Offices (West Wing) lobby this morning (May 15):
Financial Secretary: I am glad to note that Moody's has reaffirmed Hong Kong's credit rating as well as reaffirmed their outlook on Hong Kong. As you know, the foreign currency outlook is maintained as positive. They point out that there are a number of strengths in Hong Kong including the excellent financial infrastructure, the fact that Hong Kong Government does not carry any debt, the fact that we have still very large fiscal reserve, as well as, if I may use the word, a gigantic net investment position internationally which is really the total currency asset minus the foreign currency liability and this net position amounts to 1.7 times our GDP. This is a very large sum by international standard.
The Government is committed to resolving the fiscal deficit situation in medium term. We share all the rating agencies' view that the persistent and unresolved fiscal deficit, especially a very large one is not conducive to financial stability. So we are committed to resolving the fiscal deficit in medium term.
On the point about the SARS having additional pressure on the pegged exchange rate, the Government would like to reiterate that we do not have any plan to change the pegged exchange rate. I am sure you also note that Moody's has pointed out that even if there is pressure on the exchange rate, we have the ability given our resources and our system to withstand such possible pressure.
Question: If the SARS is not resolved soon, will it have any impact on the deficit situation and will it affect the rating of Hong Kong in the future?
Financial Secretary: I believe the important question is your qualification "if the SARS is not resolved soon". If the SARS is not resolved soon, obviously it would put a lot of pressure on the economic growth side as well as on the fiscal situation thereby putting possible pressure on the pegged exchange rate. That's why the Government has always regarded containing the spreading of the SARS disease as our No.1 priority and we will spare no efforts and resources in fulfilling this task. But I am sure you are aware that the international financial community is having confidence in our ability in containing the SARS. The fact that the 12-month Hong Kong dollar forward, the premium has shrunk from over 300 pips to now around 100 something pips following the reduction in new cases in SARS is a good testimony that the financial market is confident that we can resolve the situation soon.
(Please also refer to the Chinese portion of the transcript.)
End/Thursday, May 15, 2003
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