Brokerage JP Morgan Securities (Asia Pacific) Ltd says it is “somewhat disappointed” by a Monday announcement that Hong Kong would need to have another 14 days with no Covid-19 infection – i.e., 28 consecutive days of no new cases – before Macau would consider lifting its 14-day quarantine on arrival for inbound visitors coming via Hong Kong.
“We couldn’t help but be somewhat disappointed by the seemingly limited scale – at least initially – of the travel bubble plan, as well as the slower-than-expected timing of launch,” wrote JP Morgan analysts DS Kim, Derek Choi and Livy Lyu, in a Tuesday note.
JP Morgan reduced its full-year Macau GGR estimate by 5 percentage points, to be 42 percent of 2019’s GGR, with a 51 percent and 26 percent recovery respectively, relative to 2019, in the mass-market and VIP gambling segments.
Total 2019 GGR in the Macau market was MOP292.46 billion (US$36.6 billion), according to data from the local regulator.
“Not only is Hong Kong the second-largest feeder market to Macau: 15 percent to 20 percent of visitors and perhaps approximately 10 percent of gross gaming revenue [GGR],” in normal trading times, but also, “Hong Kong’s importance lies in its position as a key channel for traveller and capital flows from the mainland, in our view,” said the analysts.
Monday’s announcement “lessens the prospect of a strong uptick” in Macau GGR “in July and possibly even August, leading us to curb our enthusiasm for the summer holiday” trading outlook, added JP Morgan.
The institution now expects third-quarter and fourth-quarter GGR to reach respectively 43 percent and 58 percent of pre-Covid-19 levels, versus its previous forecast of 50 percent and 66 percent respectively.
JP Morgan said it was now assuming that what it termed a Hong Kong-Macau-mainland China travel bubble “would be gradually rolled out in the next two to three months, followed by China exit visa “normalisation,” including a resumption of electronic issuance of Individual Visit Scheme (IVS) permits for independent travellers from the mainland, “during the fourth quarter”.
Mainland China is currently the only place to have a largely quarantine-free travel bubble with Macau, amid existing travel restrictions as countermeasures against Covid-19.
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”Any reduction in [Macau gaming] tax would be positive for future profits and cash flows, all else equal”
DS Kim, Amanda Cheng and Livy Lyu
Analysts at brokerage JP Morgan Securities (Asia Pacific)