Moody’s says HK election results “credit-negative”

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Moody’s has suggested gains by the opposition camp in Hong Kong’s recent election are likely to further slow the pace of policymaking in its legislature, the first acknowledgement by a major ratings agency of the heightened political tension in the Chinese territory since the vote.

Opposition parties as a whole gained two seats in the 4 September elections, bringing the total to 29.

“With these results, filibustering, which has become increasingly common in the past two years, is likely to continue, a credit-negative development that will result in slow and less effective policymaking,” wrote analyst Serena Wang and senior vice president Marie Diron of the ratings agency’s sovereign risk group in Singapore.

Moody’s current rating for Hong Kong sovereign debt is Aa1 negative.

While the pro-Beijing camp retains 41 seats in the Legislative Council and the opposition camp has become more fragmented, Moody’s noted the latter are likely to remain united in their disapproval of the former’s approach to the territory’s relationship with Beijing.

Pointing to the one-month delay in approval of Hong Kong’s last annual budget and a year-plus tangle over approval of more spending for a bridge between Hong Kong and Macao/Zhuhai, Ms Wang and Ms Diron suggested more of the same was likely, as lawmaking “will remain slow and less predictable since the filibustering stems from disagreements about a political vision of Hong Kong rather than specific issues related to economic, fiscal or financial policies.”

Whatever the ramifications of such political push-back may be for Hong Kong’s populace in the longer term, the ratings agency’s acknowledgement of the mounting difficulties faced by pro-establishment legislators indicates how fraught the situation has become for business interests in the territory, operations of which are reliant on a generally accommodative relationship with Beijing.

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