Fitch downgrades HK for first time since 1995

Fitch Ratings Inc. downgraded Hong Kong as an issuer of long-term, foreign currency debt for the first time since 1995, saying that the territory’s recent political turmoil raises doubts about its governance.
The rating was lowered to AA from AA+ with a negative outlook, the company said in an emailed statement. The last Fitch downgrade of Hong Kong took place before the return of the former British colony to China.
Large-scale protests and unrest in the city have unnerved investors and raised the prospect of capital outflows from the financial hub, long seen as a safe haven. Almost three months of protests in the city have weakened an economy that had already been hit hard by the ongoing trade war between the U.S. and China, the city’s two biggest trading partners.
“Months of persistent conflict and violence are testing the perimeters and pliability of the ‘one country, two systems’ framework that governs Hong Kong’s relationship with the mainland,” Fitch said in a statement.
“The gradual rise in Hong Kong’s economic, financial, and socio-political linkages with the mainland implies its continued integration into China’s national governance system, which will present greater institutional and regulatory challenges over time.”
Hong Kong Chief Executive Carrie Lam disagreed with Fitch’s downgrade, as the “one country, two systems” framework and the city’s spirit of rule of law haven’t been weakened by the months of turmoil.
The downgrade had little impact on the city’s financial markets, with the MSCI Hong Kong Index trading 0.7% higher and the local dollar little changed. DB/Agencies