Update | Hong Kong stocks end session lower, but up on the week
Hang Seng Index sheds 0.8 per cent during Friday’s session as S&P’s credit rating downgrade on Hong Kong and China weighs on sentiment
Hong Kong stocks dropped on Friday led by financials and property after S&P Global Ratings downgraded Hong Kong and China’s credit ratings in two separate moves.
The Hang Seng Index fell 0.8 per cent or 229.80 points to 27,880.53, paring this week’s gain to 0.3 per cent, while the Hang Seng China Enterprises Index lost 0.8 per cent to 11,109.00.
S&P Global Ratings lowered Hong Kong’s long-term issuer credit rating to AA+ from AAA on Friday morning, hours after it downgraded China’s sovereign credit rating to A+ from AA-, citing “very strong institutional and political linkages” between China and Hong Kong.
Late Thursday, the rating agency said in a separate statement that the China downgrade reflected its views that “a prolonged period of strong credit growth has increased China’s economic and financial risks”.
Capital inflows to the Asia region are expected to continue however and today’s market drop was merely a knee-jerk reaction to S&P’s rating downgrade, analysts said.
“Hong Kong’s link with China is increasing so China’s rating change affecting Hong Kong is inevitable,” said Freeman Tsang, head of China and Hong Kong of Legg Mason. “But overall this is going to be a short term factor to investors only unless there is a real sharp decline in our foreign exchange reserves, and overall balance sheet."
In line with the sovereign downgrade, S&P cut ratings for the China units of three foreign banks, including HSBC, Hang Seng Bank, and DBS Bank.