Trouble in Macau?

Posted on December 10th, 2014

Macau

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Is the Macau dream over? The former Portuguese enclave- now a huge casino hub, is certainly seeing a drop in numbers.

Shares in Macau’s 2 biggest casino operators have been heading lower as gamblers from China slash their spending. Baccarat is famously the High Roller game of choice in the SAR (Special Administarion Region of China), but all the spare money seems to be heading onto the stock market instead.

Casino revenue in Macau fell to 24 billion patacas ($3 billion) in November- a number last seen in September 2012. While all that was going on, money has been pouring into the Shanghai and Shenzhen stock markets. The Chinese authorities have been clamping down on the grey credit market (read our article: “What is a Casino Junket?”)

Sands China and Galaxy Entertainment, the 2 big players in Macao, have lost around 30% of their value. Bear in mind that these shares have increased more than five fold over the last 4 years as players from Mainland China have made the tiny outpost the largest casino city in the world.

We’d bet that this is a temporary hiatus and with stocks heading south, it could be a good time to watch for the bottom of the market and get in. But what constitutes the bottom of the market is anybody’s guess. With the authorities in Macau tightening their rules on players betting with credit, the trend could remain in reverse for some time yet. But as ever in China, when the numbers go down, they often come back with a bang. The proof is in the timing, as ever.

Occupy Cotai Strip?

Chinese and Macanese officials in charge of the territory appear to be getting nervous over the continuing demonstrations over in Hong Kong (Occupy Central) and have been waxing lyrical about the world’s casino capital record in fully adhering to its Basic Law and it’s principle of “one country, two systems”. One thing thay don’t want is for the civil disobediance that is being witnessed in Hong Kong to spread over the Pearl River delta. This would seem a shot across the bow.

Li Gang – Beijing’s  liaison office director – urged Macau to diversify away from its gaming industry, while still focusing on growing the huge casino industry in the territory. It’s the former Portuguese colony’s 15th handover anniversary next week.

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