Moody’s downgrades Hong Kong’s outlook to negative
Moody’s has downgraded Hong Kong’s rating outlook to negative, saying that ongoing political protests in the financial hub “reveal an erosion in the strength” of its institutions.
Despite the changed outlook, Moody’s maintained Hong Kong’s overall Aa2 rating.
Read more: Protesters throw petrol bombs as Hong Kong violence persists
Rival ratings agency Fitch Ratings downgraded Hong Kong’s rating to AA from AA-plus last month – the first downgrade since the start of protests over a proposed extradition bill that have crippled the city since June.
Moody’s said its new negative outlook for the territory “reflects the rising risk that the ongoing protests reveal an erosion in the strength of Hong Kong’s institutions, with lower government and policy effectiveness than Moody’s had previously assessed, and undermine Hong Kong’s credit fundamentals by damaging its attractiveness as a trade and financial hub.”
The ratings agency said its decision to maintain Hong Kong’s overall rating was due to its “strong fiscal and external buffers” which “offer resilience to shocks and negative long-term trends.”
These include large fiscal and foreign exchange reserves, as well as low government debt, it said.
Anti-government protests in the city continued over the weekend, with police firing water cannon and tear gas to disperse demonstrators throwing petrol bombs at government buildings.
The protests were triggered by a proposed extradition bill that would have allowed Hong Kong citizens to be extradited to mainland China, but have evolved to include broader calls for democratic elections and greater policy accountability in the city.
The London Stock Exchange (LSE) rejected a takeover bid from Hong Kong Exchanges and Clearing (HKEX) last week, in part due to concerns of HKEX’s connection to the Hong Kong government. Over half of HKEX’s board is appointed by the territory’s government.
Read more: Hong Kong bourse to tell LSE investors: Ditch Refinitiv for us
In a letter rejecting the bid, LSE said it had “fundamental concerns” over the offer and saw “no strategic merit” in the proposed takeover.
“The board has fundamental concerns about the key aspects of the conditional proposal: strategy, deliverability, form of consideration and value,” LSE said.
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