...Fitch's assessment of HKSB's operating environment captures the interconnectedness of Hong Kong and China, and the bank's otherwise diversified exposure. Private-sector credit exposure is split by 71% to developed markets (most in APAC) and 29% emerging markets, and exposure to its 10 largest countries accounted for 95% at end-2017. Fitch believes that APAC's close trade and financial linkages with China pose a risk which could manifest in a weaker financial position and lower prospects for HKSB's growth. We forecast real GDP growth for Hong Kong of 3.6% in 2018, 3.0% in 2019 and 2.5% in 2020, while China's real GDP growth should slow to 6.6% in 2018 and 6.1% in 2019 and 2020. Our base case remains that the Chinese authorities will have the capacity to manage this adjustment without triggering financial instability. Fitch's macro-prudential indicator for Hong Kong has been at the highest level (MPI 3) since November 2010, due primarily to above-trend growth in the private-sector credit/GDP...
