Macau’s more than two-year recent slump in casino gross gaming revenue (GGR) has often been linked by industry commentators to China’s anti-corruption campaign. A new report from brokerage Sanford C. Bernstein Ltd suggests that months with the highest numbers of announced investigations into allegations of graft in mainland China were frequently months where Macau VIP casino GGR had registered year-on-year declines, or some moderation in demand.
In Friday’s report – as part of research for its new quarterly “China Premium Consumer Tracker” – Sanford C. Bernstein has attempted to quantify the impact of such government action, by plotting in graph form the monthly growth of Macau VIP casino GGR against the number of officially announced investigations by China’s Central Commission for Discipline Inspection (CCDI). The body investigates allegations of graft made against cadres of the ruling Communist Party of China.
Sanford Bernstein’s graph tracked Macau casino VIP GGR performance from March 2013 to March 2017. The graph suggested that since February 2016 there had been a general decline in the number of announced party discipline probes in China, coinciding with a general rise in the VIP GGR year-on-year growth rate.
But even as some brokerages are suggesting that China might have eased its anti-graft drive at party level – and that this could lead to an increase in demand among mainland consumers for Macau gambling, especially at the high-stakes end – other analysts have been warning that the recovery could still be at risk.
Japanese brokerage Nomura said in an April 25 note that a recent “rapid increase in customer deposits” for Macau junkets “not only has been a primary driver of recent VIP outperformance but also has started to attract the attention of government regulators”.
Sanford Bernstein has been warning for some time about a possible tightening of general consumer liquidity in China in the second half of 2017, and that this could have a knock-on effect for Macau VIP gambling demand.
For now though, the China credit upswing seems to be continuing, said an April 14 note from Nomura. China household loans – one indicator of consumer liquidity in the Chinese domestic market – had reached a “record high” in March, said the institution.
“The upside mainly came from shadow banking activity with its growth accelerating by 2.1 percentage points to 11.5 percent” expansion year-on-year, said the Nomura analysts.
The launch of Sanford Bernstein’s quarterly “China Premium Consumer Tracker” coincides with a “particularly auspicious period for Chinese high-end consumer spending,” said Friday’s report by its team of five analysts.
The indicator tracks data on “jewellery sales, real estate pricing, outbound tourism, international flight traffic, cruise tourism demand, Macau gaming revenues, premium auto sales, high-end liquor consumption, luxury goods retail, and high-end lodging.”
The Sanford Bernstein report stated: “Given the correlations between high-end spending and liquidity, we suspect monetary tightening in China may come to represent a headwind for demand in some of our sectors over time (notably in autos and gaming). For now though, China’s moneyed class appear to be living the dream.”
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“We see that basically the ‘golden’ periods [for Macau's casino industry] are all concentrated in the second half of this year”
Lei Wai Nong
Macau’s Secretary for Economy and Finance