China gets a downgrade
“These ratings downgrades or negative outlook shifts often mark the low in terms of bad news and market selloffs,”
Moody’s Investors Service cut its outlook for Chinese sovereign bonds to negative, underscoring global concerns about the level of debt in the world’s second-largest economy.
Moody’s lowered its outlook to negative from stable while retaining a long-term rating of A1 on the nation’s sovereign bonds.
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China’s usage of fiscal stimulus to support local governments and its spiraling property downturn are posing risks to the nation’s economy, ratings agency said.
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The change comes as China continues its efforts to shake off the risk of contagion from its deepening property rout, with the country ramping up its borrowing as a main tool to bolster its economy.
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Still, the ping from Moody’s isn’t being seen as dire.
“These ratings downgrades or negative outlook shifts often mark the low in terms of bad news and market selloffs,” said Viraj Patel, global macro strategist at Vanda Research.
“I wouldn’t see this being the case in two to three months’ time,” said David E. Rovella.
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