Gaming | Macau casino stock meltdown continues

Macau casino stocks plunged again yesterday on the back of growing concerns that the softening Chinese economy is dampening the allure of the city’s high-roller baccarat tables. After the second straight day of losses, Macau gambling shares are down double-digits compared to the week-start. The index for Macau casino operators is down 11 percent so far this week.

In Hong Kong trading yesterday, MGM China fell by 7.42 percent, while Wynn Macau and Sands China were down by 3.28 percent and 3.72 percent respectively, adding to losses accumulated earlier in the week.

The biggest losers this week were MGM China (-17.4 percent) and SJM Holdings (-12.7 percent), while Wynn Macau and Sands China held out above their rivals.

In the case of the former, Wynn Macau had already seen a steady decline in its share price since June, due in part to a troubling year of scandals and investor infighting, while Sands China may have escaped the brunt of the impact due to its recent focus on developing the mass-market segment over VIP.

Galaxy, Wynn Macau, Sands China and MGM China were all sitting at 52-week lows at yesterday’s close.

The casino stock crash comes just a few weeks before China’s October Golden Week, traditionally one of the most lucrative weeks in the gaming calendar.

Jonathan Galligan, brokerage CLSA’s head of Asia gaming research, told the Financial Times yesterday that the bearish movement was driven by concerns over the Chinese economy, rather than any performance shift in local gaming operators.

It is a view shared by many gaming analysts, who this week slashed their forecasts for Macau revenue growth next year – in some cases by more than half. The consensus view is that gross gaming revenue next year could amount to just 4 percent, compared with the double-digit growth anticipated for this year.

UBS, Deutsche Bank and Sanford C. Bernstein all indicated that structural changes to Macau’s largest customer market, mainland China, would likely hit the gambling enclave hard. They worry that trade tensions between China and the U.S. will hurt Chinese consumer spending and deter punters from visiting Macau.

U.S. casino parent companies were also down slightly yesterday. Las Vegas Sands and Wynn Resorts were both down about 1 percent, whereas the less-exposed MGM Resorts held flat.

On Sunday, the heads of some of the U.S.’s leading financial institutions, including Blackstone, Citigroup, Goldman Sachs, JPMorgan and Morgan Stanley, are expected to convene at a short-notice roundtable and meeting with China’s vice president, Wang Qishan, to discuss the ongoing Sino-US trade war.

China and the U.S. have locked horns over trade disputes that have resulted in several rounds of tariffs on their respective exports. Neither side has shown signs of retreating and analysts fear the situation will worsen over the coming months.