Debt can still be hidden easily in Hong Kong as well, even though it has had consolidated balance sheets for years. Old hands in the territory know to look with skepticism at promises by Hong Kong companies that they are not highly leveraged. While the parent company that trades may not be, open the annual report of most of Hong Kong's largest companies and there will be dozens if not several hundred associate companies, often 49 percent-owned by the listed firm. Debt on the books of associates need not be consolidated in the listed company's balance sheet, so there is often no sure way to know how much borrowing a company has undertaken. David Roche of Independent Strategy, the research firm, figures that with domestic debt levels far in excess of foreign debt in most Asian countries, governments in the region will have no choice but to inflate away some of their domestic debt by printing money.
Inflation is the enemy of the bondholder.
As for holders of foreign debt, there is always default risk to worry about. Take heart from the fact that a Hong Kong strategist, Marc Faber, once the biggest bear on the region's economy, now figures some Asian stocks could be worth buying.