Moody’s changes Macau outlook from stable to negative

The Macau government has expressed its disagreement with Moody’s decision.

Macau.- Moody’s announced on Wednesday that it has changed the outlook of the Macau government to negative from stable while keeping the city’s foreign currency issuer ratings at Aa3. The Monetary Authority of Macau issued a statement saying it disagrees with Moody’s decision.

The rating agency’s announcement came after an outlook change on the Government of China’s A1 rating to negative. It cited the costs to bail out governments and state firms as well as the country’s property crisis.

“The change in Macau’s rating outlook to negative reflects Moody’s assessment of tight political, institutional, economic, and financial linkages between Macau and the mainland, which keep the rating gap between the SAR and China no wider than one notch,” Moody’s states, adding that “the negative outlook on China’s rating, therefore, implies a negative outlook on Macau’s rating.”

Moody’s said that Macau’s “large tourism and gaming sectors are heavily dependent on China, while its banking system is similarly exposed to cross-border claims to the mainland. At the same time, tighter political and institutional linkages have become more evident in recent years, notwithstanding the broad retention of Macau’s policy autonomy under the principle of ‘One Country, Two Systems’.”

The Macau government said it will continue a series of tourism promotions that, combined with non-gaming investment by gaming concessionaires, enhance Macau’s international competitiveness. It said it adheres to prudent fiscal management, supported by ample fiscal and foreign exchange reserves.