It is unlikely that trading conditions in 2020 for the Macau casino market can get any worse than those of 2019, said a Thursday report from JP Morgan Securities (Asia Pacific) Ltd.
“We have a tough time thinking that (even half of) the negatives thrown at… Macau… last year (VIP smoking ban, renminbi depreciation, junket noises, Hong Kong… protest, visa control) will recur this year,” wrote analysts DS Kim, Derek Choi and Jeremy An.
They were referring respectively to factors including: the 2019 full implementation of Macau’s casino-floor smoking ban in casinos following a grace period for VIP rooms; and depreciation of China’s currency the yuan or renminbi, versus the U.S. dollar, which affected Chinese consumer spending power relative to Macau casino bets that are mostly in Hong Kong dollars.
The analysts also drew attention in their Thursday report to the expected easier year-on-year comparisons for casino gross gaming revenue (GGR) performance for 2020 versus 2019. The year 2018 had seen year-on-year growth in every month, according to Macau government data.
JP Morgan mentioned additionally that “eased pressure” from macroeconomic factors – including “trade tension, liquidity,” and Chinese currency appreciation “should help demand, particularly for high-end” play.
President Donald Trump signed on Wednesday on behalf of the United States an initial trade deal with senior Chinese leaders. It is said to be aimed at reducing some tit-for-tat tariffs imposed previously between the two nations following the U.S. leader’s claim of an unfair trade relationship.
Meanwhile Deutsche Bank Securities Inc said in a Wednesday memo – following talks with management of casino operators in Las Vegas, Nevada, in the U.S., some of whom also have gaming operations in the Macau market – that the Macau government was aware the city faced fresh regional competition from large-scale casino resorts.
A new Macau administration led by Ho Iat Seng, a former president of the city’s Legislative Assembly, was sworn in by China’s President Xi Jinping, on December 20. Macau is the only place in China where casino gambling is legal.
The bank’s Carlo Santarelli and Steven Pizzella wrote of their Las Vegas management discussions: “Operators noted that the new Macau government remains focused on the societal impact of the casinos and the impact expanding regional gaming competition has had on Macau.”
“We think both considerations will be at the forefront of the concession renewal process,” they added. That was a reference to an anticipated public retender process associated with the expiry in 2022 of Macau’s current six casino concessions and sub-concessions.
In its summary of the 2019 headwinds for the Macau market, the JP Morgan team had also alluded to the allegations in Chinese state media during 2019 that the Suncity junket brand had been facilitating “online gambling” offshore from Macau by some of its Macau-casino clients. The brand has denied such claims, but its boss Alvin Chau Cheok Wa, apologised in a July press conference for any embarrassment the claims had caused the Macau authorities.
JP Morgan had also highlighted as 2019 headwinds the more than six months of protests in Hong Kong, starting in mid-2019.
The events are said by some sources – including the Macao Government Tourism Office – to have spurred a decline in the number of mainland Chinese tourists using Hong Kong as a stop for a visit also to Macau. JP Morgan was also referring in its list of 2019 issues, to reports of administrative controls – ahead of President Xi’s visit to Macau in December – placed by mainland authorities on exit visas for mainland China residents wishing to visit Macau.
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