23/09/2017 10:54 AST

S&P Global Ratings cut Hong Kong’s credit rating a day after it downgraded China for the first time since 1999, a move that reflects the “strong institutional and political linkages” between the special administrative region and the mainland, the ratings firm said.

The financial hub’s long-term issuer credit rating was lowered to AA+ from AAA, S&P said in a statement Friday. The agency lowered China’s sovereign rating Thursday to A+ from AA-, citing the risks from soaring debt, and revised its outlook to stable from negative.

“We are lowering the rating on Hong Kong to reflect potential spillover risks to the SAR should deleveraging in China prove to be more disruptive than we currently expect,” S&P said in a statement, referring to the Hong Kong special administrative region.

It’s the second time this year Hong Kong’s rating has been cut in response to a China downgrade. Moody’s Investors Service in May lowered the finance hub’s rating after it cut China for the first time since 1989.

Hong Kong Financial Secretary Paul Chan said he disagreed with the downgrade by S&P, according to a statement posted on the government’s website on Friday night. The city has a sound market structure and strong regulations to prevent any spillover risks from China, he said.

“Downgrading Hong Kong after China is a natural step,” said Mark McFarland, chief Asia economist at Union Bancaire Privee. “It has been widely anticipated that S&P would eventually follow the others and that Hong Kong would be dropped a notch too.”

While S&P said Hong Kong’s credit metrics remain “very strong” based on the strength of the central government in Beijing, it faces a slew of challenges from surging property prices to the Federal Reserve’s plans to raise interest rates. Because the former British colony’s currency is pegged to the dollar, it effectively imports US monetary policy.

Analysts remain concerned with China’s swelling debt. Total borrowing climbed to about 260 per cent of the economy’s size by the end of 2016, up from 162 per cent in 2008, according to Bloomberg Intelligence estimates.

S&P’s China downgrade represents waning confidence that Beijing can strike a balance between maintaining economic growth and cleaning up its financial sector. The move may also be uncomfortable for Communist Party officials, who are just weeks away from their twice-a-decade leadership reshuffle.


Bloomberg

Ticker Price Volume
QNBK 175.00 253,804
SABIC 118.60 3,051,555
WALAA 23.70 381,943
EEC 17.96 1,356,411
SACO 71.00 167,636
STC 81.90 322,056
JABALOMAR 38.30 838,646
Index Closing Change
NIKKEI 225 23,094.67 273.35 (1.19%)
DAX 12,096.41 -27.92 (-0.23%)
S&P 500 2,888.80 -16.18 (-0.55%)
China vows to hit back as Trump targets $200 billion in goods

19/09/2018

China said on Tuesday that it has no choice but to retaliate against new US trade tariffs, raising the risk that US President Donald Trump could soon impose duties on virtually all of the Chinese goo

Oman Daily Observer

UK economy will shrink without Brexit deal: IMF

18/09/2018

Britain’s economy will shrink if it leaves the European Union without a Brexit deal and it will suffer some damage whatever terms it agrees, the International Monetary Fund said on Monday, challengin

The Gulf Today

Trump likely to announce new China tariffs

17/09/2018

US President Donald Trump is likely to announce new tariffs on about $200 billion on Chinese imports as early as Monday, a senior administration official told Reuters on Saturday.

The tari

The Gulf Today

Outlook for global refining, marketing sector 'positive'

16/09/2018

The outlook for the global refining and marketing sector over the next 12 to 18 months has been changed to positive from stable, Moody's Investors Service said Saturday in a new report.

Th

Saudi Gazette

G20 trade ministers say WTO reform ‘urgent’

16/09/2018

Trade and investment ministers from G20 countries meeting in Argentina said there was an “urgent need” to improve the World Trade Organisation, a joint statement said on Friday.

With US Pre

Gulf News