Hong Kong, Aug 2 (IANS): Asian markets fell broadly on Wednesday after ratings agency Fitch downgraded its US debt credit rating from the highest level, citing “a steady deterioration in standards of governance”.

Hong Kong’s Hang Seng Index and Japan’s benchmark Nikkei 225 both tumbled 2 per cent, leading losses in the region, CNN reported.

Tech and financial stocks were down sharply. Japan’s broader Topix index dropped 1.1 .per cent

South Korea’s Kospi shed 1.4 per cent, Australia’s S&P/ASX 200 fell 0.9 per cent and China’s Shanghai Composite Index was down 0.8 per cent.

Asian markets may “tread cautiously” as investors turn wary of foreign holders selling their US Treasuries, said Stephen Innes, managing partner of SPI Asset Management.

The selling of US Treasuries could lead to a further increase in yields, which typically caps stock market rallies, he added.

Just hours before, Fitch Ratings had cut the credit rating of US debt from the top AAA level to AA+, CNN reported.

“The rating downgrade of the US reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to ‘AA’ and ‘AAA’ rated peers over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions,” the rating agency said in a Wednesday statement.

Fitch expects America’s general government deficit to rise to 6.3 per cent of GDP in 2023, from 3.7 per cent in 2022.

Nonetheless, Goldman Sachs analysts said on Wednesday that they don’t believe there are any meaningful holders of Treasury securities who will be forced to sell due to a downgrade, CNN reported.

“S&P downgraded the sovereign rating in 2011 and while it had a meaningfully negative impact on sentiment, there was no apparent forced selling at that time,” they said in a research note.