The Strategist

Fitch downgrades Hong Kong rating due to protests

09/06/2019 - 07:44

The international rating agency Fitch Ratings downgraded Hong Kong's long-term foreign currency issuer default rating. Lengthy protests in the city infringed on the "one country, two systems" principle and threatened the city’s relationship with mainland China.

public domain pictures
public domain pictures
The agency downgraded the rating from "AA +" to "AA", and the forecast was changed from "stable" to "negative", which will affect the cost of borrowing for companies and the government.

Fitch stated that the events had caused long-term damage to international perceptions about the quality and effectiveness of the governance system and the rule of law in Hong Kong, and called into question the stability and dynamism of its business environment.

Since early June, mass protests have continued in Hong Kong over the extradition bill. The paper would for the first time allow Hong Kong to extradite suspected jurisdictions with which it does not have an extradition agreement, including mainland China.

Hong Kong Chief Executive Carrie Lam announced the formal recall of the extradition bill this week.

The negative outlook “reflects our view that even with concessions to some protesters’ demands, the degree of public discontent is likely to continue,” said Fitch. At the same time, the agency noted that Hong Kong’s “significant financial buffers” would remain intact, including fiscal reserves equivalent to 40% of the city’s GDP.


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