TNAG-2749-FCO40-3964-Economic-situation-in-Hong-Kong-1993 — Page 98

CONFIDENTIAL

pa

090/1

37;

020021

MDHIAN 3585

CONFIDENTIAL

FM HONG KONG

TO IMMEDIATE FCO

TELNO

1410

OF 021123Z SEPTEMBER 93

HKB 040/1

L. SEP 1993

INFO IMMEDIATE PEKING, UKREP JLG HONG KONG,, WASHINGTON

COPY

7?

HONG KONG CREDIT RATING

SUMMARY

1.

A US CREDIT RATING AGENCY, STANDARD AND POOR'S HAS DOWNGRADED HONG KONG'S LONG TERM CREDIT RATING FROM A TO A-MINUS. THE SHORT- TERM RATING IS UNAFFECTED. THEIR PRESS RELEASE CONCLUDES

''CHINA'S HANDS-ON STANCE ON THE AIRPORT PROGRAM AND THE FRANCHISE ISSUE SIGNALS ITS DETERMINATION TO DIRECT HK'S POLITICAL FUTURE USING ECONOMIC MEANS AS NECESSARY''

DETAIL

2.

S AND P DECIDED AT A RATING COMMITTEE MEETING THIS MORNING TO DOWNGRADE HK IMPLIED LONG-TERM CREDIT RATING FROM A TO A-MINUS. THEY HAVE PASSED US A DRAFT PRESS RELEASE WHICH IS BEING FAXED SEPARATELY. S AND P'S RELEASE IS EXPECTED TO ISSUE ON 4 SEPTEMBER A.M. NY TIME.

3.

WE WERE GIVEN SOME WARNING OF THIS MEETING AND THE LIKELY OUTCOME. S AND P'S OFFICER MADE IT CLEAR THAT THE DECISION WAS PRECIPITATED BY A WISH OF COMMITTEE MEMBERS NOT TO LEAVE THEIR PREVIOUS 'CREDIT WATCH' NOTICE OUTSTANDING TOO LONG. (IT WAS ISSUED IN DECEMBER LAST YEAR.) SHE IMPLIED ALSO THAT S AND P GENERALLY WANT TO CLOSE UP THE PRESENT THREE-POINT DIFFERENCE BETWEEN THE RATING OF HK AND THAT OF CHINA. (CHINA'S RATING IS NOW

'BBB': BUT THERE IS A GOOD CHANCE THEY WILL BE UP-GRADED IF ECONOMIC REFORMS ARE ALLOWED TO CONTINUE.)

4. THE DECISION TO DOWN-GRADE HONG KONG'S RATING FROM A TO A MINUS FOLLOWS MOODY'S DECISION EARLIER IN THE YEAR TO REVISE OUR LONG- TERM RATING TO A3. THE FACT THAT MOODY'S HAD ALREADY PUT US AT A3 MEANS THAT IN PRACTICAL TERMS, THERE SHOULD BE NO SIGNIFICANT IMPACT ON THE COST OF MTRC AND PAA BORROWING FOR THE AIRPORT. IS AN IRRITATION FOR THE MTRC, WHO ARE LAUNCHING A USD 150 MILLION BOND IN NEW YORK THIS MONTH.

IT

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