S&P has lowered Hong Kong’s long-term rating from AAA to AA+, but outlook stable.

S&P has also affirmed the A-1+ short-term issuer credit rating on Hong Kong. The transfer and convertibility assessment remains AAA.

S&P says that the downgrade reflects the lowered sovereign credit ratings of the PRC, due to the strong institutional and political ties arising from Hong Kong’s status as a special administrative region of China:

“We are lowering the rating on Hong Kong to reflect potential spillover risks to the SAR should deleveraging in China prove to be more disruptive than we currently expect. Consequently, we view a weakening of credit support for China as exerting a negative impact on the ratings on Hong Kong, beyond what is implied by the territory’s currently strong credit metrics,” says S&P in a note.

In line with China, Hong Kong’s long-term issuer rating is stable. “We expect Hong Kong to maintain its strong credit metrics across the board in the next two to three years,” says S&P.

Hong Kong’s credit rating is still three notches above that of China’s, due to their open and free economy, generally predictable and effective policy framework, and strong economic transparency, says S&P.

The move follows Moody’s downgrade of China’s sovereign debt in May of this year. Fitch affirmed China’s A+ rating as stable in July.