Moody’s Cuts Hong Kong’s Debt Rating Outlook To Negative From Stable Over Links To China

International credit rating agency Moody’s downgraded its outlook on Hong Kong’s long-term debt rating to “negative” from “stable” Saturday, following a similar downgrade on China’s debt rating outlook earlier this month.

“The revision in Hong Kong's rating outlook reflects Moody's view that 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,” Moody’s said in a statement released Saturday.

The firm had lowered China’s credit rating outlook on March 2 citing rising debt burden, falling foreign-exchange reserves and uncertainty about authorities’ capacity to implement reforms.

Last week Chinese Premier Li Keqiang lowered the country's economic growth target for 2016 to 6.5 to 7 percent, the first time Beijing has provided a range for growth instead of a specific numerical target since 1995. Last year, China grew 6.9 percent, its slowest pace in 25 years, compared with the target of about 7 percent for the year.

As an autonomous territory of China, Hong Kong’s increased political linkages are likely to weigh on its institutional strength, while the risks to China's economic and financial stability may also undermine Hong Kong's own economic and financial outlook, Moody’s said.

In response to the move, Hong Kong's Financial Secretary John Tsang reportedly assured that the city’s economic fundamentals and financial regulatory regime was “sound” and its banking sector and strong fiscal position would enable the economy weather the challenges that lie ahead.

"Those strengths, together with the Linked Exchange Rate system, will provide Hong Kong with strong buffers to deal with near-term challenges, while laying the foundation for steady growth and healthy job creation in the medium-term," Tsang reportedly said.