Investors are now understanding the return of meaningful tourism volume in the Macau market is likely to involve “small steps every two weeks” on the part of the Chinese authorities – in terms of relaxation of mainland travel policy relative to Macau – said a Thursday memo from Jefferies Hong Kong Ltd.
Possible clues had been provided by a phase of easing that began on July 15, via a relaxation of quarantine conditions for travel from Macau to nine cities in the neighbouring Chinese mainland province of Guangdong, which was then extended to the whole of the province a fortnight later.
“The Macau recovery remains dependent on IVS [Individual Visit Scheme], but we expect this to be a gradual and phased reissuance on an individual Chinese city-by-city within each province,” said Hong Kong-based analyst Andrew Lee.
He added that Guangdong “is key”, given the province accounted for “46 percent and 55 percent” respectively of 2019 and first-half 2020 “mainland Chinese visitors to Macau”, with “73 percent and 69 percent” respectively, of “2019 and first-half 2020 Guangdong visitors using IVS”.
Hubert Wang, president and chief operating officer of Macau casino operator MGM China Holdings Ltd, said on the second-quarter earnings call of the parent MGM Resorts International on Thursday, he thought IVS resumption could come in “mid-September” or even “a little bit earlier”, possibly starting with Guangdong province.
The executive added that a return from July 15 of non-tourism exit visas from Guangdong to Macau – including for business travel – which had been retrospectively reported on Thursday, would be “helpful to our business”.
Nonetheless, such travellers will still need to provide a timely test certificate showing freedom from Covid-19 infection.
Mr Wang’s boss, MGM Resorts’ chairman Bill Hornbuckle, said on the group’s earnings call that recent moves – including the easing of quarantine conditions for travel from Macau to Guangdong – were “initial steps in an encouraging direction”.
But he noted: “Hong Kong borders remain shut and the IVS and tour visa programmes have not yet restarted, which we believe is necessary for a meaningful recovery.”
The resumption of the IVS scheme has been widely touted as a key element in a rebound in Macau casino gross gaming revenue, which was down 77.4 percent year-on-year to June 30, according to Macau government data.
IVS travellers accounted for 46.8 percent of the aggregate mainland visitor arrivals to Macau in 2019, “and possibly a higher proportion of gaming revenues” at the city’s casinos for that period, wrote JP Morgan Securities (Asia Pacific) Ltd in a January memo at the time the IVS programme was suspended.
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”The travel/border policy between mainland China and Macau will fully normalise by the end of September (i.e., before the all-important October Golden Week)”
DS Kim, Derek Choi and Jeremy An
Analysts at JP Morgan Securities