Moody's changes outlook on Hong Kong's Aa2 rating to negative from stable; affirms rating

SINGAPORE - Moody's Investors Service has today changed the outlook on the Aa2 issuer rating of the Government of Hong Kong to negative from stable, and affirmed the Aa2 long-term issuer and senior unsecured ratings.

The change in outlook to negative 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 affirmation of the Aa2 rating reflects, among other things, Hong Kong's strong fiscal and external buffers, with a minimal government debt burden, large fiscal reserves and ample foreign exchange reserves, all of which offer resilience to shocks and negative long-term trends.

Moody's has also affirmed the Aa2 senior unsecured foreign currency ratings of the Trust Certificates issued by Hong Kong Sukuk 2014 Limited and Hong Kong Sukuk 2015 Limited, special purpose vehicles established by the Government of Hong Kong. The payment obligations associated with these certificates are direct obligations of the government and rank pari passu with other senior unsecured debt of the government.

Hong Kong's long-term foreign-currency bond ceiling and the local currency bond and deposits ceilings remain at Aaa, and the long-term foreign currency deposits ceiling remains at Aa2. Hong Kong's short-term foreign currency bond and bank deposits ceilings remain unchanged at P-1.