Financial Secretary Paul Chan on Sunday said tensions in the Middle East have so far had a limited direct impact on Hong Kong, but if the conflict persists it would unavoidably affect global interest rates and capital flows.

Writing on his weekly blog, Chan said the SAR's energy supply is stable largely due to China's strong backing.

"However, an increase in fuel and energy costs could place an extra burden on shipping and logistics, as well as other sectors of the economy," he said.

Chan said the government has been closely monitoring the potential effects of the tensions and the surge in fuel prices and is assessing market conditions.

He said in the short term, Hong Kong — being mostly a service economy — isn't seriously affected as it doesn't export much in the way of goods to the Middle East.

If the war drags on in the medium term, the minister said it would inevitably affect the international macro economy.

Chan said despite the conflict affecting global investment sentiment, the local markets have been operating in an orderly manner and capital flows have been stable.

The minister also revealed that February retail sales figures to be announced this week will be quite strong, buoyed in part by robust tourism figures and solid market sentiment.

He noted that so far this year, Hong Kong recorded some 13 million tourist arrivals, up around 17 percent compared with the same period last year.


Edited by Tony Sabine