Moody’s revises MTR, Kowloon-Canton to negative

Moody's Investors Service said it changed the outlooks on MTR Corp. Ltd. (Aa1), MTR Corp. (C.I.) Ltd., and Kowloon-Canton Railway Corp. (Aa1) to negative from stable.

The action follows the agency’s March 12 change in the outlook on Hong Kong's Aa1 sovereign ratings to negative from stable.

At the same time, Moody's MTR's Aa1 issuer rating and senior unsecured rating, provisional Aa1 senior unsecured medium-term note rating and senior unsecured shelf rating and provisional P-1 other short-term rating; MTR Corp. (C.I.)’s Aa1 senior unsecured rating, provisional Aa1 senior unsecured medium-term note rating and provisional P-1 other short-term rating; and Kowloon-Canton’s Aa1 issuer rating and senior unsecured rating, P-1 other short-term rating, provisional Aa1 senior unsecured medium-term note rating and provisional P-1 other short-term rating

The principal driver of the negative outlook on Hong Kong's rating is the tight linkage between the credit profiles of the Special Administrative Region and China (Aa3 negative), Moody’s said.

That linkage manifests itself in the economy, given the very strong trade links between the two; in the financial system, given Hong Kong's banking system's involvement in the Mainland; and ultimately in the political and institutional arena, given the tensions inherent in the "One Country, Two Systems" policy.

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