A day after cutting China’s credit outlook on Wednesday ( Dec. 6 ) due to costs associated with bailing out local governments and state companies or managing its real estate crisis, Moody’S downgraded its view of Hong Kong from stable to negative.
According to Moody’s, the downward outlook for Hong Kong is a reflection of the close political, administrative, economical, and financial ties between the two cities.
Hong Kong overturned the ruling on those premises.
It added that the ties with China were” a source of strength for long-term enhancement,” and that” we disagree with its decision to change Hong Kong’s record view to” bad.”
Hong Kong’s Aa3 scores were upheld by the ratings company, which took into account credit advantages like a strong and competitive market, fiscal and additional filters, and history of successful monetary and fiscal policy.
Moody’s stated that it “expects further erosion of the ( city” s ) autonomy of political, institutional, and economic decisions to continue incrementally” following the imposition of a National Security Law in 2020 and changes to Hong Kong.
It claimed that while “weaker progress in Hong Kong could weaken the government’s fiscal filters,” a strengthening trend in island China would have an impact on the economy of the island.
Separately, the ratings agency changed the perspective on Macau from firm to unfavorable.
The full-year economic growth forecast for Hong Kong’s government was revised down next month to 3.2 % from an earlier measure of a 4.0 percent to 5.0 percent range.