Ongoing protests in Hong Kong “appear to be having a slightly negative impact” on the Macau casino sector’s weekly gross gaming revenue (GGR) numbers. So said a Monday note from Nomura Instinet.
Macau and neighbouring Hong Kong, two special administrative regions of China, have often formed a two-stop itinerary for leisure visitors from mainland China.
In addition, November could post the steepest decline in GGR so far this year, outlined Nomura and another brokerage, Sanford C. Bernstein Ltd. The causes for that are most likely to do with Chinese consumer sentiment linked to macroeconomic factors, explained Sanford Bernstein, also in a note issued on Monday.
Though it stated: “The protests in Hong Kong may have caused some transport disruption and created a headwind to China visitation into Hong Kong (and onward visitation into Macau), but we believe the impact on GGR from the Hong Kong protests has been more minor.”
Earlier guidance from casino managements and investment analysts to investors stressed the Hong Kong turmoil was having no or negligible impact on Macau’s GGR.
Nomura analysts Harry Curtis, Daniel Adam and Brian Dobson said in their Monday note they expected November GGR to be down by between 8 percent and 10 percent year-on-year – which would be the biggest monthly year-on-year contraction of 2019 so far.
The biggest 2019 monthly year-on-year decline in GGR in Macau to date was recorded in August, when GGR went down by 8.6 percent to MOP24.26 billion (US$3.01 billion).
The Nomura analysts noted that most of the decline in performance so far in November had been in the VIP segment, rather than the mass one. Many of the transit visitors from mainland China via Hong Kong are adjudged to be from the mass segment.
Sanford Bernstein analysts Vitaly Umansky, Eunice Lee and Kelsey Zhu wrote that in the November 11 to 17 period “mass is estimated to have improved by high single digits of percent, but VIP volumes are likely have declined by low 30s of percent on a year-on-year basis.”
Nomura estimated that in the same period, average daily mass revenues were 8 percent to 10 percent higher year-on-year, but VIP volumes – a different measure of performance than GGR – were tracking 31 percent to 32 percent lower than the same period last year.
“We estimate GGR for the month should settle around MOP22.5 billion to MOP23 billion,” its analysts wrote.
“The midpoint of the estimated range implies a 9 percent year-on-year decline in November, or approximately 580 basis points of sequential deceleration, given a tougher one-year growth comp,” noted Nomura.
Sanford Bernstein’s analysts said they were lowering their November GGR estimate to a decline of between 13 percent to 10 percent year-on-year – which judged month-on-month would be in the range of -2 percent to +2 percent – “on a month to date trend that is softer than initially expected.” The institution noted that the Bloomberg consensus as of Monday was for November GGR declining by 5 percent year-on-year.
“Aside from a softer China economy, several other factors continue to create headwinds to GGR. Continued weakness in China’s currency poses weakness to GGR growth. Historically, there has been some correlation between GGR and the renminbi/Hong Kong dollar and U.S. dollar foreign exchange rate,” stated Sanford Bernstein, referring to the fact most Macau casino bets are denominated in the currency of neighbouring Hong Kong, currently pegged to the U.S. dollar.
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”We believe the positive stance from China towards Macau would help market sentiment in the near term despite limited short term benefit to the [casino] gross gaming revenue”
Kenneth Fong, Lok Kan Chan and Rebecca Law
Analysts at Credit Suisse