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Moody's upgrades Macao's foreign currency ratings

HONG KONG, Feb. 10 Kyodo

Moody's Investors Service Inc. said Monday it has upgraded Macao's foreign currency country ceilings for debt and for deposits to A3 from Baa1, and added a positive outlook to the new ratings.

The U.S.-based credit rating agency also changed the outlook for the A3 domestic currency issuer rating of the Macao government to positive.

Moody's said the former Portuguese enclave has strengthened its overall economic prospects three years after its return to Chinese sovereignty in December 1999.

The ending of the previous gaming monopoly by the granting of two new licenses for casinos is likely to increase investment in Macao's tourism industry, the rating agency said in a statement.

The outlook for tourism over the next several years has also strengthened, making it likely that both foreign exchange revenues and government tax revenues will rise, the agency added.

But Moody's warned that Macao still faces economic challenges, notably the possibility of higher unemployment should its textile and garment industry prove unable to compete successfully in global markets after the expiration of an international multifiber agreement in 2005, under which the enclave now enjoys a quota.

Macao could also be affected by developments in neighboring Hong Kong's financial and exchange-rate markets given that the Macao pataca is pegged to the Hong Kong dollar and that the Hong Kong currency is widely used in the enclave, the agency said.

Yet, Macao has substantial foreign exchange holdings and its mainly foreign-owned banking sector is a net creditor to the rest of the world, Moody's said.

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