China’s devaluation on Wednesday of its currency by what several investment analysts said was the most in eight months – lowering the renminbi’s fixing against the U.S. dollar by approximately 0.59 percent – could hit Chinese players’ spending in Macau, said brokerage Wells Fargo Securities LLC in a commentary that day.
“Reduced purchasing power could weigh on Chinese visitors’ spending in Macau. Macau’s currency is pegged to the Hong Kong [dollar] and U.S. dollar,” said the note from analyst Cameron McKnight.
Most bets at Macau casinos are denominated in Hong Kong dollars, which is pegged to the U.S. dollar. Macau’s currency – the pataca – is indirectly pegged to the U.S. dollar via an association with the Hong Kong dollar, whereby MOP1.03 is approximately equal to HKD1.00.
On Wednesday, China’s central bank – the People’s Bank of China – set the value of the renminbi at RMB6.4943 to US$1.00, weakening by 0.59 percent the fix of RMB6.4565 the previous day, according to data from the China Foreign Exchange Trade System.
Mr McKnight’s note referred also to the question of whether recent credit growth in the Chinese economy could be maintained, and made reference to what a number of investment analysts have said is the typical time lag – 12 months – between the expansion of that Chinese macroeconomic indicator and improvement in Macau gaming revenues.
“Chinese credit growth hit two-year highs in the first quarter 2016, as China seeks to stabilise the economy. In the last few days, several economists/commentators (China’s Xinhua news agency) have questioned whether this growth can be maintained,” stated Mr McKnight.
Following an earlier round of renminbi devaluation last year, the Monetary Authority of Macao noted – in a press statement issued in August – “the weakening of the renminbi might reduce the attractiveness of the [city] as a tourism destination for mainland visitors”.
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”We expect Goa to quickly become a US$1 billion market as it transitions to land-based casinos (from US$150 million today), which is still just a fraction of India’s total GGR potential of US$10 billion to US$17 billion”
Analyst at Union Gaming Securities Asia