Moody’s HK downgrade fuels controversy
Print Edition
China’s Hong Kong Special Administrative Region government said yesterday it strongly disagrees with Moody’s latest decision to downgrade Hong Kong’s credit rating.
Moody’s Investors Service announced on Monday it is downgrading Hong Kong’s long-term issuer rating to “Aa3” from “Aa2.” The institution, however, changed Hong Kong’s credit outlook to “stable” from “negative.”
“We strongly disagree with Moody’s assessment of Hong Kong’s current situation and are deeply disappointed by Moody’s decision to downgrade Hong Kong’s credit rating,” a HKSAR government spokesman said.
Since Hong Kong’s return to the motherland, the HKSAR government has implemented “one country, two systems,” “Hong Kong people administering Hong Kong” and a high degree of autonomy in strict accordance with the Basic Law, the spokesman said.
“We do not think there is sufficient ground for Moody’s to raise any query on them,” he said.
“Although Hong Kong has faced the most severe social unrest over the past seven months since its return to the motherland, the HKSAR government, with the staunch support of the central government, has firmly upheld the ‘one country, two systems’ principle and handled the situation in accordance with the law to curb violence on its own to restore social order as soon as possible.”
The spokesman added that Moody’s rating is not in keeping with Hong Kong’s sound credit fundamentals.
“Our fiscal performance and external positions have long been amongst those of the top-rated economies and serve as a strong buffer for Hong Kong to withstand shocks,” he said.
Confidence in the Linked Exchange Rate System has remained strong, as acknowledged by Moody’s, he said, and banks are well cushioned given their strong capital base, sound liquidity and healthy asset quality.
Furthermore, he added that capital markets have performed well over the past year, as initial public offerings and bond-financing activities have continued to thrive, and turnover for Stock Connect and Bond Connect has surged.
“The persistent social unrest reflects deep-seated problems in Hong Kong society about which the government will soon conduct an independent review. We are also proactively engaging people from different backgrounds, political stances and age groups through dialogue and listening to their views humbly to find a way out for society.”
He pointed out that Hong Kong faces many social issues, including wealth inequality, an aging population and high home prices.
Despite these issues, he said “Hong Kong’s institutional strengths and its core competitiveness as an international financial center, trade hub as well as one of the best places in the world to do business remain well in place.”
The spokesman elaborated on how the HKSAR government has proactively managed social issues over the years, stressing that “the HKSAR government will continue to humbly listen to members of the public and strengthen communications with the citizens, overcome these challenges and help relaunch Hong Kong.”
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