Moody’s lowers Hong Kong view to negative

Moody’s Investors Service said it affirmed the government of Hong Kong’s long-term debt and issuer ratings at Aa1 and changed the outlook to negative from stable.

The outlook change follows the recent outlook change on China to negative from stable, Moody’s said.

Moody’s also said it affirmed Hong Kong’s Aa1 senior unsecured rating, along with the Aa1 ratings of the trust certificates issued by Hong Kong Sukuk 2014 Ltd. and Hong Kong Sukuk 2015 Ltd., special purpose vehicles established by the government.

The payment obligations associated with these certificates are direct obligations of Hong Kong and their ratings automatically reflect changes to Hong Kong’s sovereign ratings, the agency explained.

The agency said it believes trends in Hong Kong’s credit profile will continue to track those in China due to its tightening political, economic and financial linkages with the mainland.

In particular, increasing political linkages are likely to weigh on Hong Kong’s institutional strength, Moody’s said.

The risks to China’s economic and financial stability also may undermine Hong Kong’s own economic and financial outlook, the agency said.

While Hong Kong possesses credit strengths supporting a higher rating than China’s, the close and enduring linkage between the two issuers’ credit profiles suggests that the pressures currently facing the Chinese authorities have implications for Hong Kong’s own economic, financial and institutional strength, Moody’s said.

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