Moody's upgrades display confidence in HK and mainland

PUBLISHED : Friday, 12 November, 2010, 12:00am
UPDATED : Friday, 28 October, 2016, 9:17am

Rating agency Moody's Investors Service has upgraded the government bond ratings of Hong Kong and the mainland, signalling their ability to contain possible losses from a credit boom.

The mainland's sovereign bond rating was raised by a notch to Aa3, or the fourth highest, yesterday from A1 while Hong Kong's government bond rating was moved up to Aa1, the second highest, from Aa2. Both ratings come with a 'positive' outlook.

The higher the ratings, the lower the cost of insuring against default of government bonds, strategists said.

Moody's said the decision to boost the mainland's credit rating followed the nation's efforts to tackle asset bubbles and avert bad loans arising from the lending spree last year. China's 'resilient' economic growth was a key reason behind the move, it added.

Growth in the world's second-largest economy stood at about 9.6 per cent in the third quarter of this year and is estimated to average about 9-10 per cent this year and 8-9 per cent next year.

Financial Secretary John Tsang Chun-wah welcomed the upgrade in Hong Kong's rating, which, he said, showed the city was less vulnerable to 'external shocks'.

'We are confident our strong fiscal position and robust financial system will continue to provide a buffer for Hong Kong to withstand potential external shocks,' Tsang said.

As a result of the upgrading, Moody's raised the long-term ratings of the mainland's top three policy banks - China Development Bank, Export-Import Bank of China, and Agricultural Development Bank of China - as well as the largest mobile phone service operator, China Mobile, to Aa3 from A1.

Meanwhile, the long-term foreign currency deposit rating of HSBC and the Hang Seng Bank was lifted to Aa1 from Aa2, with the outlook revised to 'stable'.

The long-term foreign and local currency senior unsecured debt and issuer ratings of the Hong Kong Mortgage Corporation were upgraded to Aa1 from Aa2, with a 'positive' outlook. MTR Corp and government-owned Kowloon-Canton Railway Corp had their debt ratings raised to Aa1 from Aa2. The upgrade is likely to affect MTR Corp's US$2 billion debt.

Sign of resilience

HK's rerating shows city can withstand potential external shocks

The long-term foreign currency deposit rating of HSBC and the Hang Seng Bank was lifted to: Aa1