“High-end” Chinese consumers may be accounting even for strength in Macau’s base-mass gambling segment, says a note from JP Morgan Securities (Asia Pacific) Ltd.
Factors could include a “recent liquidity boom” in Hong Kong which had seen “huge” oversubscriptions in initial public offerings (IPOs) there, and a “plunging” Hong Kong Interbank Offered Rate (HIBOR) in relation to borrowing.
That “likely eases access to Hong Kong dollars for some, spilling over into Macau,” wrote analysts DS Kim and Selina Li in a Monday memo.
Most Macau gambling bets are denominated in Hong Kong dollars. Additionally, China’s currency the yuan had seen a circa “4 percent appreciation since April lows,” which “has helped Chinese spending power in Macau,” added the institution .
A recent note from banking group Morgan Stanley also raised the possibility that recent Chinese government efforts “addressing overcapacity, price wars, and deflationary pressures” in the mainland economy could be helping profitability for business owners there.
The country’s leadership announced in July what it terms an “anti-involution” initiative. “It marks a shift in China’s economic approach from quantity-driven growth to quality-focused development,” said Morgan Stanley.
“With business owners making up most of the premium mass/VIP cohort, positive sentiment could be maintained as their profitability improves,” added the bank.
JP Morgan said in its Monday memo: “We are increasing our Macau forecasts for the third time in three months.”
It now projects the city’s casino gross gaming revenue (GGR) to rise 13 percent year-on-year in the second half of 2025, versus 4 percent in the first half.
In second-half 2024, Macau casino GGR was just under MOP113.03 billion (US$13.98 billion) according to government data.
Casino GGR in July this year marked the best monthly performance since January 2020, just before the onset of the Covid-19 pandemic. It rose 19.0 percent year-on-year in July, standing at nearly MOP22.13 billion, showed official data.
JP Morgan also expects acceleration in growth of industry earnings before interest, taxation, depreciation, and amortisation (EBITDA), compared to first quarter 2025 when it was actually a negative 4 percent, and second quarter when it was a positive 5 percent.
The institution forecasts 12 percent EBITDA growth in the third quarter, and 16 percent in the fourth quarter, “outpacing Street expectations”.
JP Morgan stated: “The top investor frequently-asked-question is ‘Why is Macau thriving despite weak China macro/consumption?’”
The brokerage suggests key drivers are that: “Macau demand, even base-mass, comes from the high-end Chinese, not necessarily broad consumers, whose sentiment was likely lifted by wealth effects from stock rallies in China/Hong Kong/the United States, crypto surge, etc.”
“We have seen similar green shoots emerging recently across Hong Kong retail,” its analysts added.
