Investors bet on China’s reopening leading to casino shares rising
Macau’s casinos stocks are again on the rise with Wynn Macau in the lead, as its shares rose by 22.39% as China began relaxing its strict zero-Covid policy yesterday.
Wynn Macau’s shares rose to HKD9.51 yesterday and are slated to be in the running for the group’s biggest gain in a single day this year.
The other incumbent operators’ shares also rose from 5.62% to 15.9%, following the successful renewal of their 10-year license to operate in the city.
In a note, Morgan Stanley analysts Praveen K Choudhary and Gareth Leung said that Wynn Macau “has a clear edge in terms of premium product offerings, which could become more visible when industry volumes return in 2023.”
The analysts also believe that the burden of Wynn Macau’s required non-gaming investment is much lower than its peers MGM China Holdings Ltd. and SJM Holdings Ltd., as cited in a report by Dow Jones.
The institution added that Macau may be just two steps away from travel returning to normal, assuming that borders with the mainland can fully open in the second half of 2023.
“Reopening and easier travel are key themes of 2023,” the Morgan Stanley analysts added.
Meanwhile, DS Kim, JPMorgan’s head of Asia gaming, said he expects Macau casino stocks to “finish 2022 strong and start 2023 even stronger.” He added that Wynn’s shares could be more attractive when there is a clearer picture on how the sector will recover in 2023, as cited in the report.
In a recent Fitch Ratings report, the group forecasts Macau will enjoy a 46% rebound in gross domestic product in 2023, up from a 17% decline.
The forecasts are based on the institution’s assumption that the city’s gross gaming revenue (GGR) will bounce back to half the pre-pandemic levels.
Recently, the SAR government announced that the city’s GGR will be MOP130 billion, similar to its forecast for this year.
However, it could take at least until end-2025 for GDP to return to 2019 levels, “along with moderate non-gaming diversification.”
Yesterday, the SAR announced an easing of pandemic restrictions – a move that has been in place for nearly three years, echoing Beijing.
The National Health Commission issued the newly-relaxed regulations on Wednesday, including a loosening of lockdown requirements and the elimination of the requirement to show a recent negative Covid-19 test to enter most public places.
