Analysts see December unfolding as another seriously down month for Macau gaming revenue, and they don’t expect the new year will hold much better, at least in the early going.
The world’s largest casino market is currently mired in a growth slump dating back to the summer, the result of a perfect storm of factors, including a slowing Mainland China economy, which has caused credit to tighten, and an intensive war on official corruption directed from the Communist Party leadership in Beijing.
Credit Suisse believes December’s results could fall as much as 30 percent compared to the same month in 2013, a forecast the bank attributes to stricter transit visa rules at Macau’s Zhuhai border crossing and an anxiety surrounding a planned visit by President Xi Jinping to commemorate the 15th anniversary of the city’s repatriation after centuries of Portuguese rule.
Wells Fargo expects a 22 percent decline, with revenue from VIP play falling by 28 percent and mass revenue dropping by 12 percent.
“We believe Macau gaming could remain weak for longer than expected (at least six months),” said senior analyst Cameron McKnight. “We are now forecasting minus-4 percent same-store total revenue growth in 2015, comprised of 2 percent same-store mass and minus-7 percent VIP growth.”
Deutsche Bank is slightly less pessimistic for December at minus-21 percent.
Analysts at Macquarie Securities point to a freeze in the mainland’s so-called shadow banking system as another major worry. The brokerage notes that two previous Macau slowdowns, in 2009 and 2012, were followed by “strong recoveries ignited by unprecedented credit growth in shadow banking”. But the firm says this isn’t likely to repeat itself this time because “Beijing is firm on curbing shadow banking”.
Looking ahead to 2015, the research equity firm JL Warren Capital says gaming revenue could decline by up to 11 percent through the first nine months, citing the tightening of visa rules as a factor weighing on the mass market, with a recovery not likely before October.
Prior to December, visitors in transit through Macau could enter the territory just by showing their visa to go to another country or region. Now they have to show not only the visa but the flight ticket before they are allowed to enter the territory.
“Mass market traffic is being negatively impacted by the tightening, according to our checks,” the firm said. “The change aims to prevent Chinese passport holders from using transit as an excuse to stay in Macau, often for gambling. Macau police released that last year more than 2 million transit visitors didn’t leave for a third country.”
JL Warren expects December’s revenue will fall by 25 percent year on year, resulting in a 2.1 percent decline for all of 2014.
