Press release
Government welcomes Moody's upgrade of Hong Kong's domestic currency government bond rating outlook
Friday, July 7, 2006
The Government today (July 7) welcomed Moody's decision to upgrade Hong Kong's domestic currency government bond rating outlook from "Stable" to "Positive". It also welcomed the agency's decision to review its long-term foreign currency bond rating on Hong Kong for possible upgrade.
Moody's noted that Hong Kong's fiscal and external indicators had continued to strengthen, indicating that Hong Kong now had a larger cushion against any potential shocks emanating from the Mainland. The rating agency said that Hong Kong's ratings should continue to be linked to those of the Mainland because of its political status and increasing economic and financial integration between the two, but that a wider gap might be justified.
The decision to place Hong Kong's foreign currency bond rating on review for possible upgrade was also prompted by Moody's belief that the foreign and domestic currency bond ratings should probably be identical, especially in jurisdictions with currency boards.
Welcoming the news, the Financial Secretary, Mr Henry Tang, said the decisions to upgrade the domestic currency government bond rating outlook for Hong Kong from "Stable" to "Positive" and the review for possible upgrade of Hong Kong's foreign currency bond rating reflected the agency's recognition of Hong Kong's strong economic fundamentals and improved public finances and growth prospects.
"We are committed to consolidating Hong Kong's public finances further with continued fiscal discipline. We will also be shortly launching a public consultation on the introduction of a goods and services tax in Hong Kong." Mr Tang said.
Moody's last rating action on Hong Kong was in October, 2003, when it raised Hong Kong's long-term foreign currency rating by two notches from "A3" to "A1", and with a stable outlook. The domestic currency government bond rating was Aa3, also with a stable outlook.