Moody's downgrades Hong Kong

Moody's Investors Service said it downgraded Hong Kong's local-currency and foreign-currency issuer ratings to Aa2 from Aa1 and changed the outlook to stable from negative.

The downgrade follows the sovereign rating of China to A1 from Aa3 and outlook revision to stable.

The downgrade reflects a view that credit trends in China will continue to have a significant impact on Hong Kong's credit profile due to close and tightening economic, financial and political linkages with the mainland, Moody's said.

Hong Kong's local-currency senior unsecured debt ratings also were downgraded to Aa2 from Aa1.

Moody's said it downgraded the senior unsecured foreign-currency ratings to Aa2 from Aa1 on the trust certificates issued by Hong Kong Sukuk 2014 Ltd. and Hong Kong Sukuk 2015 Ltd., which are special purpose vehicles established by the government of Hong Kong.

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 said.

Hong Kong's local-currency bond and deposit ceilings remain at AAA.

The foreign-currency bond ceiling remains at AAA and the foreign-currency deposit ceiling was lowered to Aa2 from Aa1. Hong Kong's short-term foreign-currency bond and bank deposit ceilings remain at prime-1

The economic and financial linkages between Hong Kong and China are close and broad-based, Moody's explained.

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