Hong Kong’s finance chief said on Thursday that he strongly disagrees with Moody’s decision to cut the territory’s credit rating following a sovereign debt downgrade on China.
The agency’s decision to “mechanically downgrade” Hong Kong’s local currency and foreign currency issuer ratings by one notch shortly after a similar move on China is not correct, Paul Chan said, according to the Associated Press.
Moody’s on Wednesday cut Hong Kong’s credit rating to Aa2 from Aa1, citing the city’s exposure to the Chinese economy.
The move came hours after the agency cut China’s rating, saying the nation’s financial strength is likely to erode due to slower growth and rising debt risks.
Moody’s said the downgrade on Hong Kong reflects its view that China’s rising debt would have a significant impact on Hong Kong because of close ties between the two places.
Any weakening of China’s creditworthiness “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.
Moody’s, however, changed its outlook for Hong Kong to stable from negative, saying the government’s vast cash pile can help the territory ward off financial and economic shocks.
A stable outlook means less likelihood of being downgraded again in the near future.
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