GGRAsia – Fresh China economic stimulus boosts Macau gaming stocks

Fresh China economic stimulus boosts Macau gaming stocks

Sep 25, 2024 Newsdesk Latest News, Macau, Top of the deck

Hong Kong stocks linked to Macau casino operators ticked higher on Tuesday, after the Chinese government revealed stimulus measures designed to jolt the country’s economy.

The share price of the stocks connected to Macau’s six casino concessionaires rose between 2.40 percent and 6.65 percent at the close of trading in Hong Kong.

On Tuesday morning, China’s central bank unveiled what was considered by observers its biggest stimulus since the pandemic. The package offers more funding and interest rate cuts, marking the latest attempt by policymakers to restore confidence in the economy.

The measures also include a reduction in the banking system’s reserve ratio, a cut in the benchmark rate, a reduction of rates on existing mortgages, as well as liquidity to brokers and insurance companies.

Chinese stocks and bonds rallied, and Asian stocks hit a two-and-a-half year high. The Chinese currency, the yuan, jumped to a 16-month high against the U.S. dollar.

Brokerage Seaport Research Partners said in a Wednesday memo that the announced monetary policy stimulus was “likely to improve some sentiment around China and Macau”.

“Markets reacted positively to the news as there were low expectations for any meaningful stimulus in the short term,” wrote analyst Vitaly Umansky in the report.

He added: “While the newly announced stimulus measures in China may not have immediate impact on Macau revenue, we expect that with continued stimulus measures, the Chinese economy will begin to show improvement in the medium term.”

According to Mr Umansky, a “key driver” for revenue in the Macau market in 2025 would be “stronger recovery in base mass GGR [gross gaming revenue] and overall revenue growth tied to improving economic conditions in China, along with improving consumer sentiment and spend”.

“We expect premium mass to continue being an important driver of growth in Macau, but base mass strength could lead to better than expected 2025 revenue growth in the market,” added the analyst.

In its Wednesday memo, Seaport trimmed its September estimate for GGR in Macau to MOP16.75 billion (US$2.09 billion), from a previous MOP17.75-billion forecast.

“While September had started off fairly strong, GGR weakened more than expected as the month has been progressing,” stated Mr Umansky.

“We forecast October GGR to be MOP21.5 billion, a 10.3-percent year-on-year increase, and up 28 percent month-on-month,” said the analyst.

“Our estimate is based on a Golden Week (October 1 to 7) GGR of MOP950 million per day,” he added. “This estimate is reasonable in light of strong hotel bookings and our discussions in Macau, along with historical trends.”

On Monday, nearly a week ahead of mainland China’s seven-day National Day holiday season – also known as October Golden Week – a number of luxury hotels in Macau’s casino resorts was already indicating sellouts for the relevant nights for rooms designed for a maximum two adults.