Moody’s Investors Service lowered Hong Kong’s credit rating and outlook on Monday, citing weaker-than-estimated institutional and governance strength in the backdrop of the ongoing socio-political unrest.
The rating agency downgraded the long-term issuer and senior unsecured ratings of the Government of Hong Kong to Aa3 from Aa2 and changed the outlook to stable from negative.
The absence of tangible plans to address either the political or economic and social concerns of the Hong Kong population that have come to the fore in the past nine months may reflect weaker inherent institutional capacity than had previously assessed, Moody’s said.
“It may also point to more significant constraints on the autonomy of the Special Administrative Region’s (SAR) institutions than previously thought,” the agency added.
The stable outlook at Aa3 reflects superior fiscal strength and consistent macroeconomic stability, Moody’s said. These are expected to persist through a period of heightened uncertainty about political and social developments associated with weak or negative GDP growth.
“Combined with the assessment that, albeit somewhat less strong, Hong Kong’s institutions and governance remain markedly stronger than China’s (A1 stable), these credit characteristics account for a one-notch sovereign rating gap between Hong Kong and China,” Moody’s said.
The material has been provided by InstaForex Company – www.instaforex.com