China slowdown, trade war headwinds to Macau: Bernstein
Brokerage Sanford C. Bernstein Ltd says China’s economic slowdown, the United States-China trade war and gamblers’ lack of liquidity are greater “headwinds” to Macau casinos than the unrest in Hong Kong and speculation about a visit to Macau in December by Chinese President Xi Jinping.
“While GGR [gross gaming revenue] growth has been slowing, there are a series of reasons for the GGR slowdown (largely, the U.S.-China trade war, a soft Chinese economy, RMB depreciation, lack of player liquidity, noise around Macau junket Suncity),” wrote analysts Vitaly Umansky, Eunice Lee and Kelsey Zhu in a Wednesday note. The latter was a reference to Macau’s largest junket brand and the allegations in mainland China media that it had facilitated “online gambling” outside the Macau market – a claim denied by the brand.
The Sanford Bernstein team stated: “The tightness in hotel room supply [in the Macau market] is also a factor that has been constraining GGR growth – while high end has softened, and lower end visitation growth remains solid, average spend per room has declined and with a shortage of rooms, growth under such a scenario becomes more constrained.”
The analysts added: “Macau GGR, especially VIP GGR has been slowing since mid-2018 when U.S.-China trade relations began to turn sour.”
The institution said the social unrest in neighbouring Hong Kong had “no doubt caused” some transport disruption and created headwinds to visitor arrivals to Hong Kong and onward into Macau. “But we believe the impact from the Hong Kong protests has been minor,” it added.
Anti-government protests – some of them violent – have hampered Hong Kong since June. Hong Kong’s airport authority decided to close temporarily the city’s air hub on August 12, after thousands of protesters occupied the facility’s arrivals and departures halls
The brokerage stated: “The protests in Hong Kong may help tourism to Macau (if not necessarily gaming revenues), as mainland visitors shift travel from Hong Kong to Macau.”
Macau’s visitor tally for August increased by 6.5 percent year-on-year to over 3.62 million arrivals, a figure that was fuelled by a double-digit growth in the number of day-trippers, according to official data. Macau’s visitor arrivals for the first eight months of this year tallied over 27 million, up by 18 percent year-on-year.
The head of the Macao Government Tourism Office (MGTO), Maria Helena de Senna Fernandes, said on Tuesday it was “premature” to conclude that the Macau tourism industry was benefiting from Hong Kong’s situation. She was speaking to local reporters on the sidelines of a public event.
It was reported on Tuesday that the PGA Tour Series-China was cancelling its tournament in Hong Kong next month and moving it to Macau from October 10 to 13.
In her Tuesday remarks, Ms Senna Fernandes said that aside from the golf tournament, she was not aware of other events that had been moved from Hong Kong to Macau. She said however that her office expected fewer Macau-bound package tours during September and some softness in the number of visitor arrivals from international markets.
In Wednesday’s note, Sanford Bernstein said the “softness” in Macau gaming was “likely to remain for the rest of the year”.
It added: “Aside from maybe the week or so surrounding [President] Xi’s being in Macau, there should not be any real impact specifically from his visit.” President Xi is expected to attend ceremonies in December marking the 20th anniversary of the handover of Macau to China, although the visit is yet to be confirmed.
A number of commentators has previously mentioned that any visits to Macau by senior Chinese leaders commonly coincide with a moderation in Macau casino GGR, possibly because some large-scale Chinese players prefer to keep a low profile during such politically-sensitive moments.
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