HEADLINE : Hong
Outlook Stable NY
in Deiteres
Kong, Mass Transit Railway Rtgs
S&P Creditwire 9/3/93
A-;
Cut to The implied senior
foreign and local currency ratings on the Government of Hong Kong are lowered to single
minus and single
'A', where they were
'A'
respectively, and are removed from Creditwatch, placed in December 1992.
'A'
*
-
minus on the MTRC's A on its local currency
Ratings are also lowered on the Mass Transit Railway Corporation's (MTRC) debt, to single - foreign currency obligations and single obligations. The downgrades do not reflect any change in the stand-alone creditworthiness of the MTRC, which is wholly-owned by the Government of Hong Kong.
The outlook on the ratings is stable.
S&P's 'A-1' short-term ratings on Hong Kong and MTRC were not on CreditWatch and are affirmed.
A
The downgrade
which narrows the differential between Hong Kong's ratings and China's 'BBB' foreign currency rating reflects growing evidence of China's intent to control closely political and economic developments in Hong Kong. However, the territory's ratings continue to be supported by its extremely strong international net creditor position and dynamic economy, as well as China's economic self-interest in preserving Hong Kong's vitality. British proposals to broaden the franchise for Hong Kong's 1995
1995 legislative elections were opposed by China, which last October broke off routine dialogue between the two countries on a range of topics, most notably plans for Hong
airport Kong's new
program.
Talks on the constitutional proposals and financing for the airport program resumed in late spring. While agreement was not been reached on either issue, progress on
in China's the airport negotiations
reflected recent consent to two major airport-related projects.
However, China continues to withhold approval for the overall airport program financing plan, apparently linking that agreement to British compromise on the constitutional
a
and proposals indicating its desire to control bother processes. Prospects for near-team accord on the constitutional proposals are uncertain. S&P continues to believe that China will act pragmatically to preserve Hong Kong's economic value in the long term, and that these questions will be resolved. Nevertheless, China's hands-on stance on the airport program and the franchise issue signals its determination to direct Hong Kong's political future using economic means as necessary.