Not even Hong Kong is immune from Moody’s

HONG KONG hit back at a decision this week by Moody’s to cut its credit rating on the city, which the agency said was becoming increasingly close to mainland China.

The move was announced hours after the firm downgraded China for the first time in almost three decades, citing concerns about its ballooning debt and slowing economic growth.

Beijing rejected the cut, saying Moody’s had used an “inappropriate” method to assess the risks facing the economy.

In downgrading Hong Kong, the agency outlined the growing links between the city and the mainland, with banks increasing China-related lending, while its stock market is also linked to bourses in Shanghai and Shenzhen through separate tie-ups.

“The downgrade in Hong Kong’s rating reflects Moody’s view that credit trends in China will continue to have a significant impact on Hong Kong’s credit profile due to close and tightening economic, financial and political linkages with the mainland,” it said in a statement.

Moody’s cut Hong Kong from Aa1 to Aa2 but upped its outlook from negative to stable. Earlier, it had downgraded China to A1 from Aa3 — its first since 1989 months after the Tiananmen Square crackdown — and also increased its outlook to stable from negative.

Hong Kong’s finance secretary, Paul Chan, said he “strongly disagreed” with the move. “Moody’s has overlooked the sound economic fundamentals, robust financial regulatory regime, resilient banking sector and strong fiscal position that Hong Kong has,” Chan said.

Jackson Wong of Huarong International Securities said the downgrade was unnecessary and would have little impact. “I don’t think it will affect investors’ views.” — AFP