Moody’s Investors Service’s decision to downgrade Hong Kong’s debt rating last week was based on “shallow” evidence, Hong Kong Financial Secretary Paul Chan (陳茂波) wrote in a blog yesterday.
“The evidence on which the ratings company mechanically downgraded Hong Kong’s debt rating based on the very close economic relationship between Hong Kong and the mainland is shallow,” Chan wrote in a blog on the official Web site of the financial secretary.
Enhancing cooperation with China cannot be considered negative, as China is the main growth engine for the global economy, he added.
Moody’s on Wednesday cut its rating on China’s debt for the first time since 1989, a challenge to the view that the country’s leaders can rein in leverage while maintaining the pace of economic growth.
Hours later, the company cut the rating on Hong Kong’s local and foreign-currency issuances from “Aa1” to “Aa2,” and changed the outlook from “negative” to “stable.”
It was the territory’s first cut in ranking by Moody’s since the Asian financial crisis in 1998.
“Credit trends in China will continue to have a significant impact on Hong Kong’s credit profile due to close and tightening economic, financial and political linkages with the mainland,” Moody’s said in its statement.
Closer financial ties “risk introducing more direct contagion channels between China’s and Hong Kong’s financial markets,” it said.
Chan, who was appointed financial secretary in January, said Moody’s concern for China’s economy lacked objective evidence because growth and exports this year have improved, while steel and coal oversupply have eased.
In response to the company’s “contagion channels” worry, Chan said Hong Kong’s financial system is stable and it has policies in place to improve risk management for China-related loans.
The rating firm’s outlook cut in March last year has proven to be “exaggerated” based on economic growth since then, Chan also wrote.
Moody’s cut Hong Kong’s outlook from “stable” to “negative” last year, because it said the territory’s credit profile tracked China’s.
Days earlier, it lowered China’s credit-rating outlook, highlighting the country’s surging debt burden and questioning the government’s ability to enact reforms.
China’s currency and stocks rallied, despite the downgrade.
The onshore yuan strengthened 0.5 percent, the biggest weekly gain since July last year.
Shanghai’s benchmark gauge climbed 0.6 percent last week, the most since the week ended April 7.
HEAVY INVESTMENT: Moody’s affirmed the firm’s ‘Aa3’ rating with a ‘stable’ outlook due to its leading position in the industry and ability to match customer requirements Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) revenue this year is expected to increase about 21 percent to NT$1.29 trillion (US$44.01 billion) from NT$1.07 trillion last year, driven by strong demand for advanced 5-nanometer and 7-nanometer chips mainly used in smartphones and high-performance computing devices, a Moody’s Investors Service report on Wednesday said. TSMC’s rate of revenue growth next year is to increase to 7.5 percent, the ratings agency said. The company, which supplies 5-nanometer chips for Apple Inc’s new iPad series, has introduced the advanced chips ahead of its competitors and gained a significant share of the market for the foundry industry’s
Shin Kong Financial Holding Co (新光金控) yesterday said that its insurance unit would adjust its investment portfolio after being banned from buying new stocks a day earlier by the Financial Supervisory Commission (FSC). “We will research what we can do based on the commission’s specific instructions after we receive the regulator’s formal documents,” Shin Kong Financial spokesman Sunny Hsu (徐順鋆) told the Taipei Times by telephone. The commission on Tuesday fined Shin Kong Life Insurance Co (新光人壽) NT$27.6 million (US$941,722) for reckless investment, and demanded that the insurer reduce its overseas investment ratio from 43 percent to 39 percent. The fine would affect
Taipei Times: When do you think the hospitality industry can return to how it was before the COVID-19 pandemic? How does Formosa International Hotels Group (FIH, 晶華酒店集團) fare this quarter and beyond? FIH chairman Steve Pan (潘思亮): The virus outbreak will have a serious impact on business travel, driven mainly by meetings, incentive travel, conferences and exhibitions over the past three decades. For the past six months, many businesspeople have grown used to exchanging information on the Internet, where more people can participate. The trend might sustain for three to five years until people are vaccinated and it is safe to
EQUITIES TAIEX moves sharply higher The TAIEX moved sharply higher yesterday as buying focused on Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) after a strong showing by its American Depositary Receipts overnight. However, the gains were capped after the benchmark index breached 13,000 points and ran into technical hurdles, prompting investors to turn cautious, dealers said. At the end of the session, the TAIEX was up 131.11 points, or 1.02 percent, at 12,976.76. Turnover was NT$206.328 billion (US$7.04 billion), with foreign institutional investors buying a net NT$18.47 billion in shares, Taiwan Stock Exchange data showed. TSMC rose 2.92 percent to close at NT$458.
RSS