Hong Kong SAR, China, Government of — Moody’s affirms Hong Kong (SAR) China’s

Rating Action: Moody’s affirms Hong Kong (SAR) China’s Aa3 ratings, maintains stable outlookGlobal Credit Research – 08 Mar 2022Singapore, March 08, 2022 — Moody’s Investors Service (“Moody’s”) has today affirmed Government of Hong Kong (SAR) China’s long-term issuer and senior unsecured ratings at Aa3 and senior unsecured MTN programme ratings at (P)Aa3; and maintained the stable outlook.The affirmation of Hong Kong’s Aa3 ratings, one notch above China (A1 stable), reflects Moody’s assessment of tight political, institutional, economic and financial linkages with the Mainland; and significant credit strengths.The linkages keep the rating gap between Hong Kong and China no wider than one notch. Meanwhile, Hong Kong’s strengths, which include the SAR’s significant fiscal and external buffers and highly effective economic institutions, continue to offer resilience to shocks and negative long-term trends, including a rapidly ageing population, a slowing in Mainland China’s economy and uncertainty about the global trade and investment arrangements in the context of ongoing tensions between the United States (Aaa stable) and China.The stable outlook on Hong Kong’s issuer rating at Aa3, reflects superior fiscal strength and consistent macroeconomic stability, which Moody’s expects to persist through ongoing uncertainty around political autonomy and beyond the impact of the pandemic.Hong Kong’s local currency ceiling remains unchanged at Aaa with the three-notch gap to the sovereign rating reflecting a modest government footprint in Hong Kong’s economy, a predictable and conservative approach to fiscal policy, effective economic regulation and a strong external position, offsetting political risk. Hong Kong’s foreign currency ceiling also remains unchanged at Aaa with no gap to the local currency ceiling reflecting a high degree of policy effectiveness and an open capital account.Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL463718 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and identifies each affected issuer.RATINGS RATIONALERATIONALE FOR THE AFFIRMATION OF Aa3 RATINGSThe close positioning of Hong Kong’s rating, one notch above China’s, reflects tight political, institutional, economic and financial linkages which have been confirmed since Moody’s last rating announcement on Hong Kong’s ratings, in January 2020.Over the past two years, there have been further signs of erosion of the autonomy of Hong Kong’s political and judiciary institutions, in line with Moody’s prior expectations, notably the imposition of a National Security Law and changes to the electoral system which have curtailed the capacity for local pro-democracy politicians to have some influence on the direction of key policies including in terms of the relationship with Mainland China.This process of further erosion of the SAR’s autonomy of political, institutional and economic decisions is likely to continue. It is reflected in Moody’s assessment of the quality of Hong Kong’s executive and legislative institutions.Despite this context, the overall fundamental credit drivers that position Hong…