Hong Kong banks 'too exposed to China'
Monday 24 October 2011 - by Karina Whalley
Hong Kong's banks face the prospect of debt downgrades owing to their exposure to China's uncertain financial market, according to Fitch.
The outlook for the Hong Kong banking sector is currently stable and Fitch reported that it still has adequate liquidity. But due to the financial system's sensitivity to investor confidence in China as well as global risk aversion, this liquidity could tighten suddenly, warns the agency.
Fitch sees larger banks in Hong Kong as being best positioned to maintain or expand market share while smaller banks are limited in competitiveness and might be forced into riskier areas.
The news comes amid plans by mainland China to greatly expand the renminbi market in Hong Kong by allowing foreign direct investment to be settled in the Chinese currency.
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