Hong Kong’s pensions regulator has told the city’s pension funds they may need to adjust their investment portfolios to reflect the impact of a downgrade to the U.S. sovereign credit rating, according to a statement.
Ratings agency Moody’s cut America’s pristine sovereign credit rating by one notch earlier this month, the last of the major ratings agencies to downgrade the country, citing concerns about the nation’s growing $36 trillion debt pile.
Pension funds regulated by Hong Kong’s Mandatory Provident Fund (MPF) Schemes Authority are not allowed to invest more than 10% of their total assets in U.S. Treasuries if the U.S. is downgraded from its “Aaa” rating by an approved agency.
The Authority said it sent a reminder “recently” to pension funds about staying in compliance with the rules and protecting their members’ interests, in light of “significant market events”.
Investment managers “must formulate suitable compliance contingency plans and make timely and orderly adjustments to their asset allocation in response to possible market developments,” the regulator said, responding to a query from Reuters about what it had told fund managers.
Bloomberg News reported last week that Hong Kong pension fund managers have flagged the risk of potential forced selling of their Treasury holdings after the Moody’s downgrade.
Reuters
