Standard and Poor’s on Friday lowered Hong Kong’s long-term credit rating following an earlier downgrade of its view of China’s creditworthiness.
In cutting Hong Kong’s rating to “AA+” from “AAA”, the ratings agency cited the “very strong and institutional and political linkages” between the mainland and the special administrative region.
“Following the earlier downgrade of the sovereign credit rating on China, we are lowering the rating on Hong Kong to reflect potential spillover risks to the SAR should deleveraging in China prove to be more disruptive than we currently expect,” S&P said in a statement.
On Thursday the ratings agency downgraded China from “AA-“ to “A+”, noting that “a prolonged period of strong credit growth has increased China’s economic and financial risks”.
In its latest move, S&P also changed Hong Kong’s outlook to stable from negative, and said it expects Hong Kong to “maintain its strong credit metrics across the board in the next two to three years”.
At the same time, the agency affirmed the “A-1+’” short-term issuer credit rating on the territory, adding that the transfer and convertibility assessment remains “AAA”.
It said it expects relations between the central authorities and the Hong Kong government to remain constructive “because a stable and prosperous Hong Kong advances China’s reform agenda”.
And given its expectations that real GDP growth in China will remain close to 6 percent annually in the next three years, S&P forecasts that Hong Kong will maintain higher per capita GDP growth than most other high-income economies.
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