The expected announcement of new policies from China’s central government aimed at diversifying Macau’s gaming-reliant economy are likely to be of “limited near-term benefit” to the city’s casino industry, said a recent note from Credit Suisse AG, analysing China’s nonetheless supportive stance towards Macau.
China’s President Xi Jinping will be in Macau from Wednesday until Friday (December 18 to 20) to attend celebrations marking the 20th anniversary of the city’s handover from Portuguese administration to that of China, official Chinese news agency Xinhua has confirmed. President Xi will also attend the inauguration ceremony of the fifth-term government of the Macau Special Administrative Region (SAR), reported the outlet over the weekend.
Reuters news agency reported last week that President Xi would announce during his visit new policies to support Macau’s development as a financial centre. Such policies were expected to cover the establishment of a renminbi-denominated stock exchange and the acceleration of Macau’s role as a renminbi settlement centre, as well as the allocation of additional land for Macau to develop non-gaming projects in neighbouring Hengqin island, according to sources quoted by Reuters.
“Both the tourism and finance industry are expected to be the key focus for Macau future development,” said Credit Suisse analysts Kenneth Fong, Lok Kan Chan and Rebecca Law. The analysts said that despite the fact that the policies were not likely to be “directly related to the gaming industry at this stage, they are supportive for the long-term tourism development of Macau.”
“We believe the positive stance from China towards Macau would help market sentiment in the near term despite limited short term benefit to the [casino] gross gaming revenue (GGR),” added the Credit Suisse team.
According to the institution, December casino GGR in Macau is tracking to shrink “by around 15 percent to 20 percent year-on-year”.
“The GGR data points have been weakened by the earlier-than-expected traffic control around President Xi’s visit,” noted the analysts.
In late November, Credit Suisse said in a note that earlier-than-expected visa controls imposed in the fourth quarter by mainland China authorities on residents heading to Macau could “dampen the demand” for the city’s premium mass and VIP play for part of November and into December.
The institution had cited industry sources as saying that mainland authorities were applying “temporary” administrative controls in the period from “November 22 to December 20”, said to be particularly aimed at people logged as repeat visitors from the mainland to Macau.
In its most recent note, Credit Suisse said the expected decline in December was “non-structural”.
“While this could bring downside risk for fourth-quarter earnings, we don’t see anything structural here. We expect the impact from the traffic controls to gradually normalise and therefore the GGR into 2020,” said the institution’s analysts.
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”There are likely to be cancellations of some Chinese New Year casino and junket parties and events [in Macau]”
Vitaly Umansky, Eunice Lee and Kelsey Zhu
Sanford Bernstein analysts