Editorial | Bringing down the house

Paulo Coutinho

First it was the strong winds of the anti-­corruption campaign from the North, blowing away the big red bucks from the VIP tables, which used to be the bread and butter of the local gaming industry. Then came the “irreducible” cap on tables and prospects of a full smoking ban in casinos (although the latter hasn’t played out fully yet).
If that wasn’t enough to bring down the largest gaming economy in the world, in free fall for 14 months in a row, Xi and his peers last week depreciated the yuan over 3 percent in 3 days. Although reputable economists say that only a 10 percentage-­point devaluation would have a real impact on gaming receipts, the word on The Street is: it will probably get there.
And then, what?
Comes August – month 8 in the Gregorian calendar. The Chinese superstitious numerology decided to mess with the house too.
“We believe part of the weakness [in August] is due to lower-than-normal hold rate. The hold-adjusted ADR [average daily run] would have been about MOP580 million,” analysts Vitaly Umansky, Simon Zhang and Bo Wen from Sanford C. Bernstein said by mid-month number 8.
“Hold rate” is a euphemism for “luck”. It usually favors the house. Lately, however, the house seems to be… less lucky. And apparently, it didn’t start in August.
“Among the complaints from Galaxy was that it ‘played unlucky’ in its gaming operations […] Last quarter alone unlucky hands caused a HKD335m loss,” Fast FT analysts wrote yesterday after Mr Lui and company presented their first-half interim report in Hong Kong.
So, in other words, HKD335 million was pocketed last quarter by Galaxy patrons. Good for them! (And if you really look into it, it wasn’t such a bad deal for Galaxy either: it was, indeed, a great, however costly, marketing investment.)
All things told, though, things aren’t looking pretty.
Profits for the big-six shrank on average over 40 percent in the semester, with Galaxy championing the decline with a staggering 66 percent fall, exposing its higher reliance on the junket/VIP business, which took the biggest hit over the last year or so.
Concomitantly, Macau stocks lost 40-60 percent in market value this year. And yesterday Daiwa analysts, the darkest of them all when it comes to Macau, accentuated their usually bearish outlook by downgrading gaming stocks to “sell”.
The house always wins? Perhaps, but as Lawrence the son of Ho put it the other day, gaming, the backbone of Macau’s economy, needs a helping hand.