Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Casino hub Macau braces for impact of slowing Chinese economy

Stock MarketsFeb 12, 2019 02:11AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: People line up outside Broadway Macau casino, run by Galaxy Entertainment Group, in Macau

By Farah Master

HONG KONG (Reuters) - As the Chinese territory of Macau marks 20 years since its handover from Portuguese rule, slower mainland economic growth, a weaker yuan and a simmering trade war threaten to derail growth in the world's biggest casino hub.

Macau, on China's southern coast, is the only place in the country where casino gambling is legal. But casino revenue shrunk in January for the first time in more than two years, the government said, hampered by a lack of big-spending VIP players and a smoking ban imposed at the start of the year.

To compound matters, China this week lowered its economic growth target to 6-6.5 percent in 2019 as Beijing copes with U.S. tariffs and weakening domestic demand. "We remain watching the situation with caution ... global growth is uncertain, and where the trade war ends up is also uncertain," Matthew Maddox, chief executive of Wynn Macau, said on a conference call with investors on Jan 30. "We continue to experience peaks and valleys in Macau."

Policy and regulatory changes are in focus this year with the election of a new leader in the Chinese special administrative region. And next year, casino licenses for Sands China, Wynn Macau, MGM China, Melco Resorts, SJM Holdings and Galaxy Entertainment will begin expiring.

Authorities have continued a multi-year clampdown on illicit capital flows from the mainland, taking aim at underground lending and illegal cash transfers.

The most recent bust, in January, involved the seizure of more than 30 billion yuan ($4.42 billion) just after Chinese President Xi Jinping warned of deep and complicated risks to China's economy.

Regulators in Macau are also strengthening operating and disclosure rules for junket operators, such as tighter supervision of their accounts.

Tasked with bringing in VIPs to play in the glitzy casinos, these middlemen provide credit for high rollers and collect on their debts.

A new bill would regulate junkets further, said Paulo Chan, director of Macau's Gaming Inspection and Coordination Bureau. The legislation is meant to improve the compliance of junkets, which often use underground banking networks.

The measures are expected to further cool the VIP market, which accounts for about half of the monthly $3 billion in casino revenue.

FLOOD OF VISITORS

During the Chinese New Year holiday, there was a 26.6 percent jump in visitors to the territory, hitting a record 1.2 million arrivals over seven days, according to data from Macau's Tourism body. Hotels had an average occupancy rate of 97 percent.

Those visitors, however, are spending less inside Macau's 39 casinos. Chinese consumers looking for more "experiential" holidays are instead heading out for egg tarts and to take selfies amid Macau's pastel-hued architecture. The lower growth adds pressure for casino operators struggling with rising costs, said Praveen Choudhary, an analyst at Morgan Stanley (NYSE:MS) based in Hong Kong.

Data on Chinese domestic loans and total social financing point to negative trends in the next six months, he added.

Although the newly opened Hong Kong-Macau-Zhuhai bridge now offers a 30-minute connection between Macau and Hong Kong's international airport, limited hotel supply constrains overnight visitor growth, executives say, and a weaker yuan could affect how much they spend.

Analysts are unsure how bad the casino slowdown this year will be, with forecasts ranging from low single-digit growth to a decline.

The political leader Macau chooses in 2019 will work with mainland authorities for the next five years. The two likely contenders are Ho Iat Seng, president of Macau's Legislative Assembly, and Lionel Leong, the secretary for economy and finance, which oversees the gaming industry.

Robert Goldstein, president of Las Vegas Sands, which controls Sands China, said the company remained strong believers in Macau.

"There is always something to worry about. We get that," he said. "We are just very bullish and we are blinded by the extreme size of Macau, the market today but more important the market tomorrow."

Casino hub Macau braces for impact of slowing Chinese economy
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email