Golden Week run seen fading as casino shares slide

Macau’s robust Golden Week holiday performance is unlikely to continue, with concerns over China’s softening economy weighing down the gambling outlook in the world’s biggest gaming center.

During the Golden Week, mainland tourists have flocked to both SARs despite a decline in the yuan. The numbers are impressive:  Chinese tourist arrivals in Macau for the week-long holiday that ended on October 7 jumped by 14 percent from a year earlier, according to Macau government data. Betting volume from high rollers was up more than 10 percent in the first six days of October over the same period last year, wrote Morgan Stanley analysts led by Praveen Choudhary in a note.

This rush happened despite the Chinese yuan recently declining nearly 10 percent against the U.S. dollar, following U.S. President Donald Trump’s use of tariffs as he aims to rebalance trade and change in China’s business practices.

As cited in a report issued by CNBC, falls in the yuan also mean weakness in relation to the Hong Kong dollar, as the latter is “essentially pegged to the greenback, moving in a tight, designated band.”

Still, the casino’s robust performance during the holiday is not allaying analysts’ concerns that the industry will grow at a slower pace in the next few months amid a weakening macro economy in China. The firm expects Macau gaming to grow six percent in the fourth quarter, and has lowered its forecasts for this year and 2019.

Macau casinos experienced the largest decline in Hong Kong yesterday. Shares of Wynn Macau Ltd. fell as much as 6.8 percent while Galaxy Entertainment Group Ltd. slumped as much as 6.1 percent. The Bloomberg Intelligence gauge of Macau casino stocks has fallen more than 38 percent since reaching a peak in May, outpacing the drop in the benchmark Hang Seng index.

“The Golden Week this year was very robust, better than our pre-holiday expectation,” said Andrew Lo, executive director of Suncity Group Holdings Ltd., the listed vehicle of the enclave’s biggest junket operator. “For the fourth quarter and next year, we don’t expect the performance will be as ‘golden’ as last week.”

Though Suncity’s gaming revenue climbed 16 percent during the holiday week, Lo expects a drag from China’s slowing economy and stock market slump.

That was also echoed in Morgan Stanley’s reasoning in lowering its gaming revenue growth forecast to 13 percent from 16 percent for 2018 and cutting next year’s gaming receipts growth to 5 percent from 12 percent.

Golden Week’s upbeat performance “may not continue for the remainder of the month,” Choudhary and the analysts wrote. “Macau in a slowing growth environment tends to underperform.”

In contrast to Macau, Golden Week didn’t deliver a huge payoff for China. Consumption growth was softer than last year, and retail revenue growth may also underperform, according to a CICC note. MDT/Bloomberg

Citi remains optimistic

IN AN analysis issued by Citi, the head of global gaming research, Anil Daswani, has noted, “It is encouraging to see that mainland Chinese arrivals on each of the four days are higher than those of any day during the National Day Golden Week last year.” The report cited the increase in mainland tourists during the first four days of the Golden Week, which was a 21.4 percent increase compared to the year before. The broker predicts a 5 percent year-on-year growth in the city’s October mass GGR growth. Analysts also project further optimism as mega-infrastructure projects aimed at economically integrating the two special administrative regions with southern China, known as the Greater Bay Area, commence.