Blow for social security funds plan as top China firms get downgraded

Moody's yesterday cut its outlook to negative for dozens of major Chinese firms listed in Hong Kong.

The downgrades could derail a plan by China to introduce more stock investments to social security funds.

After China's rating outlook downgrade, Moody's shifted the outlook to negative for 22 local government financing vehicles, 18 Chinese corporations, including Alibaba (9988) and Tencent (0700), and 18 state-owned enterprises including China Mobile (0941), Sinopec (0386), and CNOOC (0883).

Meanwhile, the credit rating outlooks for eight mainland banks, including five state-owned commercial banks - Agricultural Bank of China (1288), Bank of China (3988), China Construction Bank (0939), Industrial and Commercial Bank of China (1398), and Postal Savings Bank of China (1658) - have been lowered from stable to negative by the agency.

Bank of Communications (3328) and China Merchants Bank (3968) maintain stable rating outlooks.

Yesterday, the SSE Composite edged down 3 points while the SZSE Component Index jumped 62 points. In Hong Kong, the benchmark Hang Seng Index crawled up 135 points, or 0.83 percent, to 16,463 points.

The downgrades came after China's Ministry of Finance proposed to allow social security funds to allocate as much as 40 percent of their capital to stocks and 30 percent to equity-related products, to enhance investment flexibility, and a day after stock markets in the mainland and Hong Kong were rattled by the global rating agency lowering China's credit rating to negative on lower growth and property risks.

Hong Kong Exchanges and Clearing (0388) has slumped 25 percent this year but its chief executive Nicolas Aguzin says he still sees a bright future for the global economy.

Meanwhile, a wave of share buybacks by Swire Pacific A (0019), BYD (1211) and WuXi Biologics (2269) helped the market rebound, in addition to a stake increase by Sands China's (1928) controlling shareholder. Also, the Henry Cheng Kar-shun family said to have raised their stake in New World Development (0017), which has lost 51.5 percent this year.