Stock Exchange volatility can impact casinos; public investments

An investor reads the newspaper near a board displaying stock market movements at a brokerage in Beijing

Volatility in the Shanghai and Shenzhen stock exchanges can impact casinos by deterring VIP gamblers, although it is hard to predict the impact this can have on revenues, local economist Albano Martins explained.
With the VIP market consistently losing traction to the mass market, Mr Martins said that the stock slump in mainland China will not have a direct impact on the casino stocks, since those are listed in Hong Kong, with the exception of Melco Crown, that suspended its trade at the beginning of the month.
However, Albano Martins says that he is more concerned with the public financial reserve investments made by the government. According to data provided by the Secretary for Finance Lionel Leong, MOP7.5 billion of those funds have been invested in stock exchange markets in Hong Kong and mainland China. That’s about one fifth of the total stock investments made by the local government, and 10 percent of the total amount of financial reserve investments.
Lionel Leong has already acknowledged that the drop in the mainland stock exchange markets has had an impact on the public investment revenues, yet he pointed out that no losses were registered.
“Depending on the date the government made the investments in Shanghai, it will be hard to maintain, as Lionel Leong stated recently, the government is not losing money with those investments,” Albano Martins indicated. “It is almost certain that it will lose money, since the investments were made when the stock was valued. For now we can’t know, because they are not releasing the data, but let’s wait until the end of the year to know what the securities portfolio of the local government is and assess if the investment has been lost or not.”
The local economist says the he is optimistic about the recovery of the Shanghai Stock Exchange, since the central government “has intervened and injected money into the market.”
“This measure was implemented so as to prevent big shareholders of [certain] companies selling their positions, and this has had an impact on the drop. The government acted and the Shanghai Stock Exchange will go up,” he said.
According to an analysis published by Bloomberg on Friday, the Shanghai Stock Exchange Composite Index had lost 28 percent since its peak on June 12, the worst sell-off in two decades. About USD3.9 trillion in market valuation has evaporated, more than the total annual output of Germany—the world’s fourth-largest economy—and 16 times Greece’s gross domestic product. The benchmark is still up 82 percent in the past year, the most among the world’s major markets.
As shares tumbled, companies rushed to apply for trading suspension. More than 1,400 companies stopped trading on mainland exchanges, locking sellers out of 50 percent of the market. The China Securities Regulatory Commission also banned major shareholders, corporate executives, and directors from selling stakes in listed companies for six months. MDT/Agencies