Hong Kong Finance Chief Questions Moody’s Over Debt Downgrade

Moody’s Investors Service’s preference to hillside Hong Kong’s debt rating final week was formed on “shallow” evidence, Hong Kong Financial Secretary Paul Chan wrote in a blog on Sunday.

“The justification on that a ratings association mechanically downgraded Hong Kong’s debt rating formed on a really tighten mercantile attribute between Hong Kong and a mainland is shallow,” Chan wrote in a blog on a central website of a financial secretary. Enhancing team-work with a mainland can't be deliberate disastrous as China is a categorical expansion engine for a tellurian economy, he added.

Paul Chan

Moody’s cut a rating on China’s debt for a initial time given 1989 on Wednesday, a plea to a perspective that a country’s leaders can rein in precedence while progressing a gait of mercantile growth. Hours later, a association cut a rating on Hong Kong’s local- and foreign-currency issuances to Aa2 from Aa1, and altered a opinion to fast from negative. It was a territory’s initial cut in ranking by Moody’s given a Asian financial predicament in 1998.

“Credit trends in China will continue to have a poignant impact on Hong Kong’s credit form due to tighten and tightening economic, financial and domestic linkages with a mainland,” Moody’s pronounced in a statement. Closer financial ties “risk introducing some-more approach contamination channels between China’s and Hong Kong’s financial markets.”

‘Sound Fundamentals’

Hong Kong’s supervision pronounced in a matter on a website shortly following that it disagreed with a preference by Moody’s, citing Chan. The ratings association ignored Hong Kong’s “sound mercantile fundamentals, clever financial regulatory regime, volatile banking zone and clever mercantile position,” a supervision said.

Chan, who was allocated Hong Kong’s financial secretary in January, stretched on that justification with his blog post on Sunday. He pronounced Moody’s regard for China’s economy lacked design justification given expansion and exports this year have improved, while steel and spark oversupply have eased. In response to Moody’s “contagion channels” worry, Chan pronounced Hong Kong’s financial complement is really fast and it has policies in place to urge risk government for mainland-related loans.

The rating firm’s opinion cut in Mar 2016 has proven to be “exaggerated” formed on mercantile expansion given then, Chan also wrote. Moody’s cut Hong Kong’s opinion to disastrous from fast final year given it pronounced a city’s credit form tracked China’s. Days earlier, it lowered China’s credit-rating outlook, highlighting a country’s surging debt weight and doubt a government’s ability to order reforms.

China’s banking and bonds rallied notwithstanding final week’s debt-rating downgrade. The onshore yuan strengthened 0.5 percent, a biggest weekly benefit given Jul 2016. Shanghai’s benchmark sign climbed 0.6 percent final week, a many given a week finished Apr 7.

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