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Fitch Downgrades Hong Kong for First Time Since 1995 on Turmoil

Demonstrators, seen from inside a tram, link hands along a street in Hong Kong, Friday, Aug. 23, 2019. Supporters of Hong Kong’s pro-democracy movement created human chains on both sides of the city’s harbor Friday, inspired by a historic protest 30 years ago in the Baltic states against Soviet control. PHOTO: AP/Kin Cheung

By Tian Chen and Eric Lam | 5 September 2019

  • Rating company says integration with China presents challenge
  • Hong Kong’s Fitch rating still higher than mainland China’s

BLOOMBERG — 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 Friday. 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.” […]

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