Fitch Ratings: Zero Covid strategy hampers SAR’s gaming recovery

China’s zero Covid policy is slowing Macau’s recovery and its new concession process, according to the report, Fitch Ratings 2022 Outlook: Global Gaming.
According to the American credit rating agency, global gaming operating environments are improving, with those geared toward domestic visitation poised to reach or exceed beyond pre-pandemic levels in 2022.
While several countries learn to live with the virus, China, Hong Kong and Macau still maintain a zero tolerance policy, hence the closure of borders and maintenance of strict entry requirements.
However, the policy comes at a cost.
According to Fitch, China’s “zero Covid” policy is hindering Macau’s recovery, while alternative gaming destinations have accepted the endemic status of the virus.
“Local and regional Covid-19 cases will be the primary driver of visitation and ultimate performance in 2022,” according to the note.
“To the extent travel between China and Hong Kong recovers faster than our assumption of a gradual recovery, Macau revenues should outperform [those projections]. Operators note that pent-up demand exists and [that] transit visas [will not be] an impediment, [assuming the absence of] regional Covid-19 cases,” it added.
On Tuesday, Macau casino stocks in New York surged 6.19% yesterday as a result of speculation that Hong Kong’s border will soon reopen.
This comes after reports that Hong Kong and Beijing are in discussions about the opening of quarantine-free travel between the two regions, which is reportedly planned for “early December.”
Analysts from Sanford C. Bernstein had previously noted that the “reopening [of restrictions between mainland China and] Hong Kong would be a positive impact on Macau and successful reopening for HK/China travel could lead to continued easing of travel restrictions between China and Macau.”
Meanwhile, regulatory uncertainty will be a key global theme in 2022 as Macau’s gaming concessions expire in June and uncertainty remains concerning the rebidding process and the regulatory and operating structure.
Just recently in his Policy Address, Chief Executive Ho Iat Seng admitted that current gaming licenses could again be extended if the new gaming law setting the rules for the new concession tender is not enacted in time.
“Fitch believes the new concession process will be pragmatic, though additional volatility is expected ahead of the June 2022 expirations to extent government communication is sparse,” the firm said.
It added that the gaming operators in the SAR have contributed “meaningful capital and social investment” as part of their current concessions.
“Unlike other industries seeing greater Chinese government regulation, such as tech and education, Macau operators have been heavily regulated for the past 20 years and its gaming environment already provides for meaningful social and financial oversight,” Fitch concluded.

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