Macau Remittance Cap Likely To Rise: Gaming Stocks In Focus

The People's Bank of China recently increased the daily limit on money transfer from Macau to Mainland China accounts to 80,000 yuan ($11,424) from 50,000 yuan ($7,140), thus ushering in good news for casino operators in the Macau. However, the bank has not confirmed the date it will be effective from.

Per the People's Bank of China, increase in individual’s daily limit will make trading between the two markets more expedient.

Gaming Stocks Rises

Following the news, companies such as Wynn Resorts, Limited (NASDAQ:WYNN) , Las Vegas Sands Corp. (NYSE:LVS) , MGM Resorts International (NYSE:MGM) and Melco Resorts & Entertainment Limited (NASDAQ:MLCO) , gained 3.9%, 1.1%, 0.5% and 3.8%, respectively, on Dec 18. Moreover, year to date, the industry has grown 27.9%, compared with the S&P 500’s rally of 26%.

Mainland China stands to benefit from this move as it is a major contributor to the Macau’s gaming revenues. In the first eight months of 2019, nearly 19.53 million visitors came to Macau from Mainland China.

Moreover, the government of China is intends to support Macau’s economy in every possible way. In line with this it plans to introduce favorable policies, which in turn is expected to improve visitation pattern and boost tourism and traffic in the region. These include the approval of Macau’s maritime expansion plans that are expected to aid shipping and tourism. Further, the government has enabled mainland Chinese cities to offer multi-entry permits.

Moreover, the opening of the world's longest sea-crossing bridge and tunnel in the previous year, which connects Macau to Hong Kong and mainland China's Pearl River Delta, is likely to prove beneficial for casino operators.

Bottom Line

A tough operating environment in Macao weighed on casino stocks from June 2014 to most part of 2016. In fact, the crackdown on corruption in China compelled Macauofficials to impose restrictions on high rollers to stop billions of dollars from being siphoned off illegally from mainland China to Macao. Consequently, this lowered footfall at the local casinos, leading to a constant decline in gaming revenues. Slowdown in China, tighter visa policies, political unrest and a smoking ban on mass market gaming floors compounded the woes.

We believe increase in daily limit on money transfer from Macau to Mainland China accounts will bolster visitation to Macau.

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