China Rating Cut Hits Shanghai Stocks But Other Asia Markets Rise

HONG KONG, , (APP - UrduPoint / Pakistan Point News - 24th May, 2017 ) - Shanghai and Hong Kong stocks tumbled Wednesday after Moody's cut its rating on China warning about its growing debt mountain, but most other Asian markets edged up following a positive lead from the US and Europe.

The ratings agency said its downgrade on the world's number two economy came because of the likelihood of a "material rise" in debt throughout the economy and as potential growth continues to slow.

Beijing has tried to address a toxic brew of unregulated and risky lending, which is increasingly viewed as a threat to global financial stability. But analysts are unsure about leaders' willingness to push on with the reforms as huge borrowing has been a key driver of the growth the Communist Party relies on for political legitimacy.

China's economy grew last year at its slowest pace in a quarter of a century and there are expectations it will continue to ease over the coming years. "It is a psychological blow that China will not take kindly to and absolutely speaks to the rising financial pressures in China," Christopher Balding, an associate professor at the HSBC school of business at Peking University in Shenzhen, told Bloomberg news.

While Moody's also upgraded China's outlook to stable from negative, equity traders sold up. Shanghai, which has already been under pressure since last month on worries about a crackdown on leveraged trading, fell one percent, while Hong Kong lost 0.4 percent. The Yuan fell 0.1 percent against the Dollar.