GGRAsia – Chinese savers to aid Macau if confidence surges, says CBRE

Chinese savers to aid Macau if confidence surges, says CBRE

Jul 12, 2023 Newsdesk Latest News, Macau, Top of the deck

The Macau casino industry’s recovery could see “another leg up” to complement this year’s increase in visitor volume, when “Chinese consumers regain enough confidence to tap into the excess savings accumulated during the pandemic,” says a Tuesday note from CBRE Securities LLC.

The memo said the brokerage was resuming coverage of three Macau gaming operators – Galaxy Entertainment Group Ltd; Melco Resorts and Entertainment Ltd; and SJM Holdings Ltd, in order to “round out” its analysis of the city’s gaming market.

“Chinese consumers historically increase their savings rate during periods of uncertainty like during the global financial crisis and the Covid-19 pandemic. However, the savings rate steadily declines after peak periods of savings,” wrote CBRE analyst John DeCree and associate Max Marsh.

“Given the quantum of excess savings and the elevated savings rate, there is a potential wave of revenge spending from Chinese consumers similar to the trends seen in other gaming markets like the U.S.,” said the brokerage.

“While some economists attribute the 2022 surge in savings” on the Chinese mainland “to the deferral of large purchases like homes,” research by the People’s Bank of China “reveals Chinese consumers are more likely to increase spending on tourism than large ticket items, including homes,” stated CBRE.

That suggested home purchases by Chinese consumers “would remain on hold as tourism spending is poised to accelerate,” the brokerage added.

CBRE said – citing data from the People’s Bank of China – personal deposits on the mainland grew approximately 60 percent since the start of the pandemic, to CNY130 trillion (US$18.1 trillion) in May 2023.

“In 2022 alone, Chinese personal deposits increased by CNY17.9 trillion (US$2.5 trillion), marking the single largest annual increase on record,” stated CBRE.

“With the U.S. and other Western economies staring at a potential recession late this year or inearly 2024, Chinese exports and industrial production will likely face further headwinds,” stated the CBRE team.

It added: “In this scenario, Chinese policymakers may need to ramp up fiscal stimulus targeting increased domestic consumption to offset a decline in export activity and maintain economic and gross domestic product targets. This could help accelerate the transition from saving to spending.”

The institution also observed that – while at the end of May, visitor volume to Macau had been only circa 55 percent of the pre-pandemic level of 2019 – subsequently hotel and transport capacity had been improving.

So far, the recovery in tourism had “largely come from neighbouring Guangdong and Hong Kong,” noted CBRE. “When infrastructure ramps back up, Macau should be able to draw customers from deeper into mainland China.”

On Saturday and Sunday, Macau registered daily visitor volume at 100,000, said on Tuesday Maria Helena de Senna Fernandes, director of Macao Government Tourism Office, during an update on the market she gave during the Global Gaming Expo (G2E) Asia, held in Macau.