Moody’s Cuts Outlook for Eight Chinese Banks, Hong Kong

A day after announcing a bearish stance on the nation’s sovereign bonds due to concern over the level of debt, Hong Kong Moody’s Investors Service cut its outlook for eight Chinese banks to negative from stable.

According to a statement released by Moody’s on Wednesday, the change in outlook on the government’s credit ratings from stable to negative was primarily responsible for the rating action taken by financial institutions such as the Industrial and Commercial Bank of China Ltd. and the China Development Bank.

China has tried to guard its obligation status, with the national bank helping its help for the yuan and state media running a progression of articles referring to specialists who revealed Moody’s comprehension might interpret the economy. The CSI 300 Index recovered on Wednesday after a three-day slide in Chinese markets.

On Thursday, the gauge resumed its downward trend, with some companies falling in Hong Kong, including Tencent Holdings Ltd. and Alibaba Group Holdings Ltd. This is after Moody’s changed its point of view toward 18 Chinese non-monetary corporates, remembering the two tech monsters for Wednesday.

Moody’s followed Thursday with significantly more standpoint changes, incorporating certain banks in Hong Kong and Chinese state-claimed undertakings.

In addition, Moody’s lowered its outlook for Hong Kong and Macau and looked into downgrading 26 Chinese local government financing vehicles. After the National Security Law was put into effect, the agency said that Hong Kong’s political and judicial institutions appeared to have less autonomy.

In a statement late on Wednesday, the Hong Kong government said that Moody’s had made “unfounded comments” about the city’s autonomy and disagreed with the change in outlook. They also said that Hong Kong’s growing ties with China are a strength rather than a constraint.

The Chinese banks that Moody’s changed to negative from stable incorporate three strategy banks and five huge state-claimed business banks.

According to the statement, “Moody’s expects support provided to financially-stressed entities to be more selective,” which will “prolong risks of further strains for state-owned enterprise and regional and local governments.”