May 19, 2025 – Stock markets across the Asia-Pacific region opened lower on Monday as investors reacted to Moody’s downgrade of the U.S. credit rating. The agency lowered the U.S. sovereign rating from Aaa to Aa1, citing concerns over rising fiscal challenges, growing federal debt, and refinancing difficulties amid elevated interest rates.
Markets showed mixed reactions, with Japan’s Nikkei 225 down 0.45%, South Korea’s Kospi declining 0.47%, and Australia’s ASX 200 edging down 0.37%. Meanwhile, China’s Shanghai Composite fell 0.2%, reflecting investor concerns over China’s latest economic data, which showed strong industrial production but weaker-than-expected retail sales and fixed asset investment.
Despite the downgrade, analysts suggest that a major market sell-off is unlikely, as investors remain focused on upcoming economic reports from China and policy decisions from the Reserve Bank of Australia. In the U.S., markets ended last week on a mixed note, with the S&P 500 gaining 0.70%, while the Dow Jones Industrial Average jumped 331.99 points.
Expert Opinions
Financial analysts have weighed in on the impact of the downgrade. Vasu Menon, OCBC’s managing director of investment strategy, noted that while the downgrade reinforces concerns about the growing U.S. budget deficit, it is unlikely to trigger a major market collapse. He emphasized that these fiscal challenges have been widely discussed for months, and investors have largely priced them in.
Meanwhile, Moody’s projected that the U.S. fiscal deficit could rise to nearly 9% of GDP by 2035, up from 6.4% in 2024, driven by expanding interest obligations and entitlement spending. The downgrade follows previous rating cuts by S&P in 2011 and Fitch in 2023, further fueling concerns about the long-term sustainability of U.S. public finances.
Asian markets reacted sharply, with Hong Kong’s Hang Seng Index falling 0.6%, Tokyo’s Nikkei 225 losing 0.4%, and Shanghai’s Composite Index dropping 0.2%. Broader declines were reported across Seoul, Singapore, Sydney, Wellington, Taipei, and Jakarta.
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