Macau’s VIP gambling segment is likely to see a “significant” slowing of growth in the second half of 2018, says brokerage Sanford C. Bernstein Ltd.
The institution said in a Friday note that such a trend would in likelihood be due to a number of political and economic factors expected to affect neighbouring mainland China, which supplies a majority of the gamblers visiting the city.
“Although it is likely to continue to show strength over the next few months (or even the next two quarters in 2018), the VIP model is likely to face structural headwinds in the latter part of 2018 from instituted cooling measures on Chinese real estate, a credit tightening in China, an increasing [focus on] regulatory environment in Macau and continued Chinese government focus on capital outflows in China,” stated the brokerage’s analysts Vitaly Umansky, Zhen Gong and Cathy Huang.
“While growth will decelerate from 2017, 2018 will still show respectable growth (driven more by mass) and long term secular growth drivers are still in place,” said the memo.
“In 2018, we expect total GGR [gross gaming revenue] to grow 10 percent year-on-year, and VIP GGR and mass GGR will grow 8 percent year-on-year and 11 percent year-on-year respectively,” added the brokerage.
The official growth rate of Macau’s VIP and mass segments respectively for full-year 2017 will not be made public until later this month, when details of fourth-quarter GGR recorded by segment are due to be announced by Macau’s gaming regulator, the Gaming Inspection and Coordination Bureau.
Headline growth for total GGR in 2017 was 19 percent, the gaming bureau revealed on January 1.
A Monday note from investment bank Credit Suisse AG said Macau VIP gross gaming revenue (GGR) growth had slowed since mid-December.
On December 27, official Chinese news agency Xinhua reported that – following a meeting of the politburo of the Communist Party of China (CPC) Central Committee, led by President Xi Jinping – a statement was issued saying that “the campaign to ensure full and strict governance over the Party and curb corruption shall not stop”.
The same meeting was also said to have received a work report from the CPC Central Commission for Discipline Inspection, and discussed the party’s anti-graft activity planned for 2018.
Business risk consultant Steve Vickers told a meeting in Macau on Thursday that Macau was inevitably going to be drawn into the orbit of China’s anti-graft drive, due to the “huge wall of capital” sitting just over the border on the mainland, some of it seeking a way out of the country.
Mr Vickers noted: “Macau is easy to target [for criticism] but actually things are quite transparent here. You can see a lot. The [financial transaction] numbers are largely published.”
He added: “But because Macau is so large in gaming terms and in banking terms, then it is an obvious target…. Further action on underground banks in China is obviously going to happen; further action on capital outflow is certainly going to happen.”
In 2017, Macau’s casino industry alone generated casino gross gaming revenue equivalent to US$33 billion, but that was 27 percent below the nearly US$45 billion generated at a peak seen in 2013, according to gaming bureau data.
“The yabadabadoo [golden] years are over. It’s a different time now,” stated Mr Vickers, chief executive of Steve Vickers and Associates Ltd, based in Hong Hong.
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"The [Macau] government has a lead in this subject in regards to what should be done after the [gaming] concessions expire. We will be first listening to what the government will say”
Ambrose So Shu Fai
Vice-chairman and chief executive at Macau casino operator SJM Holdings