Fitch Ratings downgraded on Wednesday the ratings of Alibaba Group Holding Ltd and Tencent Holdings Ltd. to 'A' from 'A+' after China's sovereign rating was reduced to 'A' on April 3. Tencent Music Entertainment, a subsidiary of Tencent, also saw its rating drop to 'A-' from 'A'.
Fitch explained that the ratings of these companies are closely tied to China's sovereign rating due to their mostly domestic operations and significant government regulation. Since China's Country Ceiling is set at 'A', the companies' foreign-currency ratings move in line with their local-currency ratings.
"This is based on the companies' predominantly domestic businesses and the level of government regulation, oversight and intervention in their sector," the agency said.
