HK government says subprime yet to pose systemic risk

The US subprime mortgage crisis has yet to cause serious economic problems for Hong Kong, a senior government official told the territory’s Legislative Council on January 16.

“According to the information available to us, the subprime problem in the US has not caused any systemic implications for Hong Kong’s economic and financial structures,” said Chan Ka-cheung, secretary for financial services and the treasury in Hong Kong. “The relevant systems remain structurally stable.”

But he warned that Hong Kong would not escape the “repercussions” of a US economic slowdown. Uncertainties caused by a slowing US economy and subprime mortgage concerns have already affected recent export growth, where the value of total exports saw a 9.3% year-on-year increase from January to November 2007, compared with a 9.4% year-on-year increase in 2006.

“While the economy is facing a number of uncertain factors, the administration believes that with its high degree of flexibility and adaptability, and the strong recovery over the last four years, it will be able to withstand possible external impact,” Chan added.

But nervousness about a possible US recession has hit Hong Kong’s equity markets. On January 16, the benchmark Hang Seng Index shed 5.4% or 1,386 points to fall to 24,450 points, marking the fifth consecutive losing session. It was the third-largest daily fall in a decade.