Macau gaming stocks were sent reeling last week, with prices tumbling from March 11 to March 14 by a combined total of HK$35 billion (US$4.4 billion).
According to Macau Business, each of Macau’s Big 6 casino concessionaires took a hit, with Wynn Macau seeing the sharpest decline, 13.2 percent. SJM Holdings’ shares fell 12.3 percent, Sands China’s 11.6 percent, Melco International Development’s 11.5 percent and MGM China’s 10.4 percent. Only Galaxy Entertainment Group sustained a loss of less than 10 percent, dropping 5.0 percent.
Business Insider suggested three reasons for the selloff, which it called the “three C’s”: concession renewals, crackdowns by regulators and Covid-19. Bank of America analyst Shaun Kelley identified four primary concerns for Macau investors:
- A new lockdown in Shenzhen following a surge of Covid-19 cases on the Chinese mainland
- A major viral outbreak in Hong Kong, with a reported 30,000 new cases
- Concerns about possible delistings of U.S.-listed Chinese ADRs
- Growing geopolitical tensions in U.S., Europe, Russia and China
Macau revenue numbers for the week ending March 9 were down up to 85 percent from 2019 levels and down half from February levels due to the latest Covid surge. As of March 15, the total market cap represented Galaxy, MGM China, Wynn Macau, Sands China, Melco Resorts, SJM was calculated by Morgan Stanley to reach some US$43 billion.
“Recent developments have added ongoing concern from China’s zero-tolerance Covid policy, and we believe investors will start to question whether a significant improvement in operating conditions in 2H ’22 is achievable,” Kelley said.
Due to continuing restrictions on travel from Hong Kong and for mainland individual visa and tour group visas, Morgan Stanley predicts that it might be the second half of 2023 or later before gaming mass revenue is normalized, with stocks possibly to “languish at current levels for longer.”
Asia Gaming Brief has reported that at least 37 million people have gone into lockdown due to the rise in Covid infections, with China seeing its highest caseloads since the initial outbreak in Wuhan.
Analysts have written down their forecasts for gross gambling revenue this month, with Bernstein now saying that GGR could be 86 percent lower than in the same month of 2019. The impact could last into April or even May.
All of this is unfolding against the backdrop of a gaming concession retender, which has been extended six months from June 26 to December 26.
As recently as March 13, Macau Chief Executive Ho Iat Seng said Macau’s economy is “gradually showing signs of post-pandemic recovery”, but the “volatility” of the Covid-19 situation has created uncertainty about the city’s economic prospects. The chief executive also pledged to make new progress in the development of new industries in Macau such as big health and modern finance.
Ho also said 2022 is a “crucial” year for Macau to seize the opportunities created by the nation’s continuous development, including diversification of the city’s economy beyond gaming. He said the various amendments to Macau’s gaming industry law are in line with its objective of developing the city into a world tourism and leisure center.
A bill amending the gaming industry law is currently being reviewed by a standing committee of the Legislative Assembly after its outline was passed by a plenary session in its first reading in January.
