The stocks of four of Macau’s six licensed gaming operators showed gains as of Tuesday afternoon, as some investment analysts suggested fresh regulatory measures touted as targeting Chinese consumer demand for casino gambling in the city were likely to be of limited effect.
The stock prices of Galaxy Entertainment Group Ltd, Sands China Ltd, SJM Holdings Ltd and Wynn Macau Ltd – all traded on the Hong Kong Stock Exchange – were all up for the day.
“History tells us that, while there could be a near-term blip in middle-market mass gaming revenues, Chinese gamblers are very resourceful in trying to move money out of the mainland,” said a Monday note from Japanese brokerage Nomura.
Most of the Macau gaming shares dropped on Monday, versus gains of 0.4 percent for the benchmark Hang Seng Index in Hong Kong. The Monday correction in Macau stock prices followed news that day that the city was to introduce new identity verification processes for cash withdrawals from automated teller machines (ATMs) by people using Chinese mainland-issued China UnionPay Co Ltd bank cards. The fresh measures will involve presentation of a mainland identity card and a facial recognition scan.
A Monday note from Daiwa Securities Group Inc stated: “This latest development does dampen the prospects of achieving the Street’s [consensus'] much-higher [Macau] growth trajectory in 2017.”
The institution’s analysts Jamie Soo, Adrian Chan and Jennifer Wu added: “We… find it difficult to justify the Street’s high level of GGR [gross gaming revenue]… expectations for 2017 of mid- to high-teens year-on-year growth (versus our forecast of +8 percent year-on-year), especially on the back of such rhetoric against money outflows from [mainland] China.”
Nonetheless several brokerages – including Daiwa – noted in Monday commentary that Macau had witnessed previous regulatory adjustments that they said had been proven with time to have little overall effect on Chinese customers’ demand for gambling in the city.
“Recall that in December last year, news of daily [Macau] ATM withdrawal limits sent Las Vegas Sands Corp, Melco Crown [now Melco Resorts and Entertainment Ltd], and Wynn [Resorts Ltd] approximately 11 percent to 14 percent lower in a single day, but proved largely ineffective in crimping actual demand,” said Nomura.
In December the Monetary Authority of Macao announced it had set a limit of MOP5,000 (US$624) or HKD5,000 (US$642) per transaction for withdrawals in the city’s ATMs, when bank cards issued by mainland China banks were used. Investment analysts had said the impact of those new per-transaction limits was to push up withdrawal costs for consumers.
The Monetary Authority however clarified that the daily withdrawal limit with the use of such cards outside mainland China remained at CNY10,000 (US$1,448), or at an annual withdrawal limit of CNY100,000.
Daiwa said in its Monday note that the newly-announced ATM identity verification policy “likely has more bark than bite”.
The institution noted that in late-2015, Macau’s Monetary Authority had announced real-time monitoring of UnionPay use in order to “tackle pawnshop-jewellery shop liquidity”. The monitoring initiative included new point of sale machines capable of scanning a mainland cardholders’ identity card, to verify the identity of the bank cardholders.
Daiwa’s analysts stated: “We are now almost 1.5 years following the aforementioned announcement and our ground checks indicated the impact of the new requirement to have had a rather negligible impact on both the jewellery-pawnshop and overall liquidity environment in Macau.”
They added: “Such liquidity channels have also opened up in the recently opened casinos. Indeed, we are now entering into the 10th month of consecutive GGR growth both in the VIP and mass-gaming segments.”
The rate of year-on-year growth for VIP casino GGR in the first quarter was nearly double that of the mass segment, according to data released on April 18 by the local regulator, the Gaming Inspection and Coordination Bureau.
“The timing of the roll-out and the [new ATM] technology to provide the upgrade is still unknown, and we certainly don’t see it adversely impacting the pace of the VIP lift the market has seen of late,” said a Monday note from Christopher Jones of the Buckingham Research Group Inc.
The South China Post newspaper had reported on Friday – citing a source it did not identify – that monthly ATM withdrawals in Macau currently exceeded HKD10 billion (US$1.28 billion).
Meanwhile Buckingham Research said it was increasing its estimates for May’s year-on-year growth in Macau casino GGR to 14 percent to 16 percent, from 13 percent to 15 percent, “based on better than expected performance during Golden Week”. The latter was a reference to a holiday period in China encompassing May’s Labour Day holiday.
Sanford C. Bernstein Co Ltd analysts Vitaly Umansky, Zhen Gong and Yang Xie said in a Monday note: “We expect the GGR number to be weaker in the coming week on the back of the visit of Zhang Dejiang, one of the top government officers of China.” Mr Zhang, the chairman of the Standing Committee of the National People’s Congress – the third-highest ranking member in the central government of the People’s Republic of China – arrived in Macau on Monday for a three-day visit to the city.
Sanford Bernstein estimated nonetheless that May’s year-on-year casino GGR expansion was likely to be in the range of 14 percent to 17 percent.
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