Overnight, Moody’s highlighted the likelihood of a “ material rise” in economy-wide debt and expectations that China’ s financial strength could “ erode somewhat” as a result.
O vernight, Moody’s highlighted the likelihood of a “material rise” in economy-wide debt and expectations that China’s financial strength could “erode somewhat” as a result.
Jim Reid, of Deutshce Bank, points out that following the ratings downgrade China’s rating at Moody’s is now level with that of Japan and below other Asia economies of Taiwan and Macau.
He added: “While there were no real revelations in the Moody’s statement the timing appears to have caught markets by surprise a little.
“Equity markets in China initially fell sharply on the news and while having pared back some of the losses, are still underperforming this morning.”
C hina’s offshore yuan slipped in knee-jerk reaction to Moody’s downgrading China’s long-term local and foreign currency issuer ratings by one notch. However, the overall response was limited.
The yuan fell to 6.8901 per dollar, down by 0.1pc, before pulling back to 6.8841 for a loss of about 0.05pc.
E uropean shares are mixed in early trade, stuck just below 21-month highs, after Moody’s downgraded China’s rating as the country’s debt mountain continues to climb.
Shares in the region were hurt by weakness in mining, while oil produces edged up on the back of strength in Brent crude prices.
Here’s a snapshot of the current state of play:
M ike van Dulken, of Accendo Markets, said: “A mildly positive opening call comes as investors weigh up Moody’s credit downgrade for China on debt sustainability concerns, a lukewarm reception for Trump’s first budget (does it all add up?) as well as rising optimism ahead of tomorrow’s OPEC meeting (especially after more favourable US inventory data) and news of potential M&A in the soft commodity sector.”
W eighing in on the move by Moody’s to downgrade China’s credit rating, Paul Donovan, economist at UBS, said:
“Asian equities sort of noticed, which is unusual, normally no one pays any attention to the actions of the credit ratings agency. Because if you give a credit rating agency attention every time it changes a rating, it will just encourage the credit rating agency to change ratings again.
“However, the reaction has been very modest and there is no real economic insight in the move.
