Stocks of Macau casino operators fell in the Hong Kong market on Monday, coinciding with mainland China reporting the worst Covid-19 outbreak since the pandemic began. The new wave of infections coincided with a decrease in stock valuations across every major sector, from technology to casino gambling.
The mainland authorities reported 3,602 new confirmed coronavirus cases on Monday (March 14), compared with 1,437 a day earlier, according to China’s National Health Commission. The surge comes as the Omicron variant is driving the worst Covid-19 outbreak in the country since early 2020.
Macau has been imposing quarantine restrictions for inbound travellers from an additional number of places in Guangdong province and elsewhere in mainland China.
Brokerage Sanford C. Bernstein Ltd said in a Monday memo that that increasing Covid-19 cases in the mainland “could lead to greater travel impediments in the near term and constrict” the tally of visitors to Macau and the amount of gross gaming revenue (GGR) in the market “for the rest of March and into April”.
The mainland authorities have upped travel controls in a number of provinces, and two cities in the neighbouring province of Guangdong – Shenzhen and Dongguan – are currently under full lockdown for at least seven days.
By the close of trading in Hong Kong, shares in all six casino operators fell, with Wynn Macau Ltd experiencing the steepest decline, at 13.2 percent. SJM Holdings Ltd fell by 12.3 percent, and Sands China Ltd saw its share price decline by 11.6 percent.
Melco International Development Ltd, the parent of U.S.-listed Melco Resorts and Entertainment Ltd, decreased by 11.5 percent at the close of trading on Monday. MGM China Holdings Ltd saw its share price fall 10.4 percent, while Galaxy Entertainment Group Ltd declined nearly 5.0 percent.
China had until recently managed to contain outbreaks of the Covid-19 virus with citywide lockdowns, mass testing and stringent contact tracing. But health experts warned that with daily cases now numbering in the thousands, more cities could soon announce partial of full lockdowns.
In Monday’s note, Sanford Bernstein suggested that casino GGR in the Macau market stood at MOP1.9 billion (about US$236 million) in the first 13 days of March, with the average daily rate down 45 percent year-on-year, to just MOP146 million.
“Concerns over [a] potential mass outbreak in China will lead to tightened travel policy and limit visitation to Macau in the near-term,” wrote brokerage analyst Vitaly Umansky. He said the institution was reducing its March GRR estimate, expecting the average daily rate to fall by 55 percent month-on-month.
“April will most certainly see significantly lower GGR than was initially expected, as is likely May,” Mr Umansky added.
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”The upswing in visitation and gaming revenue is likely to aid Fitch-rated casino operators with a presence in Macau in reducing their debt levels”