Moody's Investors Service said yesterday it might cut its short-term credit ratings for the Hong Kong Government, two government-owned corporations, three commercial banks and one utility. The US-based agency's announcement, which has the potential to affect up to US$3 billion in debt, was prompted by concern that the Asian economic turmoil might have 'increasingly adverse consequences for Hong Kong'. The move to place Hong Kong's prime-1 short-term foreign currency rating for bank deposits and other short-term obligations on review for possible downgrade comes after Moody's downgraded its outlook for Hong Kong banks in late October. If the review - the first since the rating was assigned in 1984 - eventually ends in a downgrade, it would mean the Government and other institutions might find it more expensive to borrow. Also put on review were the short-term foreign currency ratings of the Mass Transit Railway Corp (MTRC), Kowloon-Canton Railway Corp, Hongkong and Shanghai Banking Corp (HSBC), Hang Seng Bank, Bank of America (Asia) and China Light & Power. All at present stand at prime-1. The agency said, since much of the economic core of Hong Kong was confidence sensitive, it would explore the potential impact of recent Asian market volatility on Hong Kong's financial and asset markets. It would, in particular, study whether Hong Kong had been and would be affected by the depreciation of Asian currencies. Financial Secretary Sir Donald Tsang Yam-kuen described the Moody's assessment for Hong Kong as 'unfriendly' but said he would accept the assessment because the agency was an independent institution. He urged Moody's officials to listen more to Hong Kong Government officials and members of the business community the next time they visited the SAR. MTRC finance director Clement Kwok King-man said the Moody's review did not indicate the corporation had any financial problems that might impair its debt-repayment capability. The corporation's present gearing ratio of 25 per cent - excluding the 'several billions of cash in hand' - was its lowest in the past 19 years, he said. HSBC, part of HSBC Holdings, expressed its disappointment but said it was unable to comment further because it did not know the rationale behind the Moody's latest review. Hang Seng Bank saw no reason for a possible downgrade and it said, as Moody's pointed out, Hong Kong's economic fundamentals remained strong, especially compared with other issuers with the same ratings.
