CLSA: ‘FX crackdown’ appears overblown

Concerns that a crackdown on foreign currency exchanges may hurt the city’s lucrative casino industry seem overblown, according to a new report.
According to CLSA analysts Jeffrey Kiang and Leo Pan, Macau’s August gross gaming revenue (GGR) grew 6% month-on-month to around MOP19.8 billion, despite recent publicity about enhanced enforcement in Macau and on the Chinese mainland against unlicensed touts that offer to change Chinese yuan (RMB) into Hong Kong dollars (HKD), and vice versa.

As the analysts observed, “Despite the illicit money exchange crackdown, August GGR increased 6% month-on-month.”

This growth in GGR, the analysts noted, “signals to us that [a] crackdown in Macau should have stabilized,” even though the July figures may have been weaker due to various international sports events that “had diluted foot traffic.”

The CLSA report’s conclusions align with previous statements made by Galaxy Entertainment Group Ltd.

In a mid-August earnings presentation, Galaxy Entertainment’s management reportedly said that “business momentum has been intact in third-quarter 2024 thus far.”

Looking ahead to October’s Golden Week, a week-long holiday on the mainland, coinciding with China’s National Day on Oct. 1, CLSA’s “proprietary data suggest hotel booking” levels had “not trended down,” with “28 out of 34 hotels” the brokerage tracks “fully booked on the weekend of Oct. 5.”

The analysts also noted the “average room rate” of the hotels they surveyed for the October Golden Week was at a level equal to USD499 per night, indicating strong demand.

Overall, the report suggests concerns over the crackdown’s impact may have been “overdone.”

To crackdown on illicit currency exchanges, the government has proposed strengthening laws around unregulated money trading operations.

An amendment to the draft “Law to Combat Gambling Crimes” would make unauthorized foreign exchange transactions criminal offenses. Victora Chan