John Tsang challenges Moody’s credit rating warning for Hong Kong

Financial Secretary says agency, which warned about effects of filibustering, should learn more about city, but CY Leung takes the opposite approach, cautioning new lawmakers against such delaying tactics

PUBLISHED : Tuesday, 13 September, 2016, 8:46pm
UPDATED : Tuesday, 13 September, 2016, 10:58pm

Hong Kong’s finance minister yesterday questioned a warning by Moody’s Investors Service that a new generation of recently elected lawmakers could hurt the city’s credit rating with their filibustering in the Legislative Council.

But while John Tsang Chun-wah challenged the ratings agency and asked if it was being “fair” to Hong Kong, Chief Executive Leung Chun-ying took a contrasting approach to warn that such delaying tactics in the legislature had harmed the city’s economic development.

Tsang suggested that the agency learn about Hong Kong “in depth” before jumping to conclusions.

“If they could understand the place more, they would be able to know whether the situation would really affect the entire economy or the whole government operation,” Tsang said. “A more in-depth understanding would come up with a better conclusion, and that would be fairer to the place.”

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On Monday – about a week after the Legco elections – Moody’s warned investors that policymaking could get bogged down as new anti-establishment lawmakers take up the filibustering torch in the coming term. This could bring down the company’s current “Aa1” rating for Hong Kong in the months ahead, meaning the government would have to pay more when borrowing on international markets.

Tsang said he would meet newly elected lawmakers soon. “I believe firmly that stronger communication brings about understanding, which would be helpful in resolving issues,” he said.

Leung, on the other hand, warned new lawmakers against filibustering.

“[The fact that] Moody’s is downgrading Hong Kong’s rating because of filibustering, regardless of it being reasonable or not, has illustrated how filibustering has brought [about] negative impacts in the international community,’’ Leung said.

Moody’s latest warning was not echoed by the other two “big three” ratings firms.

Fitch Ratings’ sovereign ratings director, Andrew Fennell, said the company was very confident that Hong Kong would keep its current “AA+” rating with a “stable’’ outlook that had not changed since November 2010.

Despite all the filibustering, “they have always managed to pass the budget, so fiscal policies can pass, and that is a key item that we look at”, he said.

“Political tensions have been growing for some time in Hong Kong. It is something that we will continue to monitor over the medium term.

“But looking at Hong Kong today, the government continues to run a budget surplus, and both fiscal and foreign reserves are high, which show the government has buffers in place to address future economic challenges if required.”

According to the government, Hong Kong’s fiscal reserves at the end of March this year stood at HK$842.9 billion.

Fennell said political disagreements affect Hong Kong’s rating only when they prevent the city from enacting economic policies.