Author: China National News
Posted: Friday 26th May, 2017
Hours after it cut China’s credit ratings for the first time in nearly 30 years, Moody’s Investors Service downgraded Hong Kong’s local and foreign currency issuer ratings.
Moody’s changed Hong Kong’s outlook to stable from negative, indicating that the risks to the city’s rating are balanced.
Downgrading Hong Kong’s rating to Aa2 from Aa1, the agency said that credit trends in China will continue to have a significant impact on Hong Kong’s credit profile due to close economic, financial and political ties with the mainland.
The move was widely expected after Moody’s downgraded China, pointing out that the financial strength of the economy will erode in coming years as growth slows and debt continues to rise.
Further, Moody’s pointed out that financial ties between Hong Kong and the mainland were becoming deeper through platforms such as the Shanghai-Hong Kong stock connect scheme, the Shenzhen-Hong Kong stock connect scheme and the bond connect which is expected to be launched this year.
In a statement, Moody’s said, “While these connects bring benefits including, it is hoped, enhanced liquidity, they also risk introducing more direct contagion channels between China’s and Hong Kong’s financial markets.”
Meanwhile, the government in Hong Kong criticized the move, arguing that the city was well equipped to deal with any challenges.
Financial Secretary Paul Chan said in a statement, “Moody’s has overlooked the sound economic fundamentals, robust financial regulatory regime, resilient banking sector and strong fiscal position that Hong Kong has. These elements will continue to enable the economy to embrace the challenges ahead arising from the changing external environment.”
Hong Kong is semi-autonomous after it was handed back to China by Britain in 1997.