October’s sizable improvement in gaming win appears to indicate that Macau’s recovery from the Covid-19 crisis, while slower than initially hoped, appears to be on track.
A trio of analysts with JP Morgan Securities (Asia Pacific) note that daily win has largely held its own since the Golden Week holiday at the start of the month, averaging MOP200 million (US$25 million) since the festivities ended, compared to the MOP280 million a day recorded during the holiday, and both sets of results showing major improvement over September’s daily average of MOP74 million ($9.3 million).
If the trend continues, the group forecasts a year-on-decline for the month in the range of 70-75 percent.
Monthly win was down 90-95 percent over the summer, before the neighboring mainland province of Guangdong, a prime source of visitation, removed its quarantine measures, and Beijing restored individual tourist travel to the casino hub nationwide.
Through September, gaming revenue stood at MOP38.61 billion ($4.8 billion) for the year, down 82.5 percent compared to the first nine months of 2019.
“We believe continued improvement in sequential (weekly/monthly) GGR trends will serve as a tailwind for Macau stocks, with much, if not all, of the bad news priced in, in our view,” Deutsche Bank analysts Carlo Santarelli and Steven Pizzella said in a recent client note.
The good news is that for the last month mainland China has resumed issuing visas for individual travel to Macau, although visitation has been slow to ramp up, due in large part to Covid-related precautions that have slowed the application process.
Macao Government Tourism Office Director Maria de Senna Fernandes has said the local government, likewise, will not relax “too easily” the barriers to entry the territory currently has in place to contain the virus, which include a mandatory quarantine for all travelers from Hong Kong and a ban on all entries from outside China.
“The public (is) still concerned about the pandemic,” she said.
As of the end of August, visitation was down year to date by 87 percent compared to 2019, and Fernandes said a decline of upwards of 90 percent for all of 2020 would not be unexpected.
Credit monitoring agency Fitch Ratings said that while it is positive on the ultimate impacts of visa restoration, the return of “short-distance gaming tourism” to the city will be “slow.”
Concerns remain also over the possible fallout from Beijing’s new get-tough policy on China’s chronic capital flight problem, which the central government blames in part on the flow of funds to casinos abroad.
The State Administration of Foreign Exchange has said it plans to strengthen foreign exchange market supervision and will employ new weapons to combat “underground banks” and other networks involved in cross-border gambling.
The government also has announced the creation of a “blacklist” of overseas gaming destinations which it blames for disturbing the “commercial order of the foreign tourism market in China”.
In support of these policies the Standing Committee of the National People’s Congress is expected to approve an amendment to the country’s criminal statutes that will add “organizing and soliciting by casinos abroad” as a specific offense. The measure also will increase the penalties for the existing crime of “establishment of casinos” within China.
Analysts say the combined effect of these moves, while certainly a potential blow to Macau’s regional competition, could wreak collateral damage on the local market as well, at least in the short term, by inducing high rollers from the mainland to pull back on their gambling in the territory and crimping the ability of the junkets that finance them to access capital and move it across the border.
“We believe investor expectations remain relatively subdued, largely due to the negative headlines around corruption crackdowns and (on) international gaming (involving) mainland” residents, the Deutsche Bank analysts said.
They added, however, that they believe Macau will benefit down the road.
“The impact these regulatory declarations could have on the junket network are understood, while longer term, these moves could drive incremental mainland play to Macau, as opposed to other international jurisdictions.”
