...Fitch assesses HKSB's operating environment through a blended approach with a strong bias towards Hong Kong's and China's regulatory and economic environments. The bank's private- sector credit exposure splits 70% to developed markets (most of them in Asia-Pacific) and 30% emerging markets, its 10 largest countries accounted for 94% of the total at end-1H16. Fitch forecasts real GDP growth for Hong Kong of 1.5% in 2017 and 2018 while we expect China's real GDP growth to slow to 6.4% in 2017 and 5.7% in 2018. Our base case remains that the Chinese authorities will have the capacity to manage this adjustment without triggering financial instability. We believe that Asia-Pacific's close trade and financial linkages with China pose a risk that could manifest itself in a weaker financial position and lower growth prospects for HKSB. Hong Kong's MPI 3 (macro prudential indicator), was first triggered in 2010 due to above-trend credit/GDP and house prices, and will remain in force until end-2017....
