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Rating hit: Volatile year for Hong Kong topped by downgrade

 

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Year of upheaval: Protesters continued to take to the streets of Hong Kong in January

Year of upheaval: Protesters continued to take to the streets of Hong Kong in January

Bloomberg

Year of upheaval: Protesters continued to take to the streets of Hong Kong in January

Fitch Ratings has downgraded Hong Kong as an issuer of long-term foreign currency debt, saying it is facing a "second major shock" from the coronavirus after prolonged social unrest last year.

Hong Kong's rating was lowered to AA- from AA with a stable outlook, with real gross domestic product expected to fall by 5pc this year after a 1.2pc decline in 2019, Fitch said. "Efforts to contain the spread of the virus locally appear to be gaining traction, but risks to our forecast remain to the downside and dependent on the evolution of the pandemic globally, given Hong Kong's status as a small, open economy," analysts at the ratings firm wrote.

Fitch downgraded Hong Kong's rating to its lowest level since 2007, putting it below that of markets such as Macau and on par with the likes of the UK.

The ratings agency also said the downgrade reflected its view that Hong Kong's gradual integration into China's national governance system and increased economic, financial and socio-political links to the mainland justified a closer alignment of their respective sovereign ratings.

"These established trends are exemplified by the central authorities taking a more vocal role in Hong Kong affairs than at any time since the 1997 handover," it said.

The Hong Kong government said it was "disappointed" with Fitch's assessment.

"The view that Hong Kong's rising economic and financial ties with the mainland is credit negative is also ungrounded," a government spokesman said in a statement yesterday.

The pandemic is the latest blow to Hong Kong's economy, threatening to further extend a recession that began in 2019 after months of anti-China political unrest.

The city's shops and businesses buckled under the full force of the coronavirus outbreak in February as retail sales plummeted by the most on record amid growing travel restrictions and social distancing measures.

Consumption in the city has been severely curtailed as mainland Chinese tourists stopped visiting last year, while residents have been staying at home to avoid infection during the coronavirus outbreak.

The jobless rate rose for a sixth straight month in March to the highest level since October 2010.

Bloomberg

Irish Independent