Moody's ups Hong Kong

Moody's Investors Service said it upgraded the government bond ratings of the Hong Kong Special Administrative Region to Aa1 from Aa2, its foreign-currency bank deposit ceiling to Aa1 and its foreign-currency bond ceiling to Aaa.

A positive outlook was assigned.

The main driver for the upgrades and the outlook change was the upgrade of the Chinese government's bond rating to Aa3 and the positive outlook assigned to that rating, Moody's said.

The ratings also considered the prospects for continued and improving government financial strength, the lessening vulnerability to external shocks, including any from mainland China, as demonstrated by the continued health of the financial sector through the global crisis, and the government's own strong financial position, the agency said.

But because of the region's legal status as a part of China and because of increasing financial and economic linkages with the rest of China, there is also an element of China risk inherent in Hong Kong's rating, Moody's said.

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