Three shots in the arm for the gaming industry: JP Morgan

As of yesterday morning, Macau’s gaming stocks exhibited a combined growth of 8 to 11%, vis-à-vis the Hang Seng Index’s (HSI) increase of 1.5%, apparently driven by “reopening and catch-up laggard plays in the market,” JP Morgan reported in its statement published yesterday.
On the back of the encouraging news in the stock market, the brokerage also underscored another three “mildly positive” pieces of news that could help prop up Macau’s gaming industry that “might be worth flagging.”
The three promising events include China’s controlled pandemic situation, Macau’s vaccination rollout and a “decent” GGR demand during the tail-end of the Chinese New Year (CNY), analysts DK Kim and Derek Choi said.
On February 22, China downgraded the last remaining high-to-medium-risk areas, including Heilongjiang province and certain cities in Hebei, to low-risk areas. This reopens the door to quarantine-free travel between Macau and all cities in China.
Having said that, the brokerage’s analysts stated that the two provinces had made a “negligible contribution” of visitors into Macau, which were just 2% of overall tourist arrivals pre-pandemic.
However, the relaxation hints that “China is increasingly comfortable with easing travel restrictions after the Spring Festival and hence, this is directionally positive,” JP Morgan said.
In addition, Macau commenced its vaccination rollout for the general public on the same day as the downgrades.
Dr Alvis Lo, medical director of the Conde de São Januário Hospital, stated in a media briefing on the same day following the rollout that there is a possibility that vaccination could replace Covid-19 testing to permit travel into mainland cities.
However, the measure is not yet on the table and no guidelines regarding the matter have been formulated so far, he stated.
JP Morgan regarded Lo’s remarks as one of the pieces of good news for cross-border travel in the future.
The last reassuring factor is expected to be the growth of Macau’s gross gaming revenue (GGR) in the third week of February, which the brokerage forecast will increase to MOP466 million per day — more than double from prior weeks (MOP200 million in the past two weeks), and “much better” than the October Golden Week rate of MOP260 to 270 million per day.
The newly-released memo of JP Morgan yesterday came just a day after the brokerage published a report forecasting a pick-up in Macau’s GGR in the later half of February.