International edition
September 28, 2021

The city is seeking to regulate approvals for construction of new casinos

Macau gaming stocks look good after plan to limit expansion

(Macau).- Shares of gaming stocks jumped in Hong Kong on Wednesday, on hopes of possible rating upgrades and on remarks from Macau's leader that the city will regulate approvals for new casinos. Fernando Chui said the city is seeking to regulate approvals for construction of new casinos, apart from those projects that have already received such endorsements.


lso bullish for the sector, Chui didn't mention any cap on the number of gaming tables at the casinos, as some had feared. In Wednesday's trading, shares of Galaxy Entertainment Group Ltd. jumped 5.3%, Wynn Macau Ltd. rose 1.6%, SJM Holdings Ltd. added 5.8%, Melco International Development Ltd. spiked 7.3% and Sands China Ltd. climbed 3.9% in Hong Kong trading. Most of these stocks had declined in Tuesday's session on caution ahead of Chui's address.

"The general tone [in Chui's speech] is supportive for gaming and property, particularly for mass casino operators such as Sands China and SJM. Policies on immigration and housing should benefit the property sector," Deutsche Bank analyst Karen Tang wrote in a note to clients.

Tang was referring to Chui's mention of a possible relaxation of immigration policies, which could result in more expatriates working in Macau and consequently higher residential real-estate prices. "Separately, despite strong gaming revenue in Macau, channel checks suggest that visa relaxation may be more likely than visa restrictions in the near term," she said.

Macau, which like Hong Kong is a special administrative region of China, surpassed Las Vegas as the world's biggest market by revenue for casinos several months ago. The city's economy currently depends heavily on the gaming industry and on tourist arrivals into the city from mainland China and Hong Kong. The Chinese government, which had imposed several restrictions on travel to Macau in 2008, relaxed those curbs last year, helping the gaming sector over the last few months.

Credit Suisse analysts said in a report that Macau's gross gaming revenues jumped to $3.4 billion in the first two months of this year, up 66% from the same period a year ago. They forecast 2010 full-year gaming revenues at us$ 18.6 billion, up 25% from last year.

They said that after a recent correction in Macau gaming stocks amid concerns about China's credit-tightening policies, the "risk-reward has turned much more favorable."

"We believe the government's tightening measures are likely to be the drivers of negative sentiment but unlikely to have much impact on the current [revenue] growth trend, which should present a good buying opportunity," the analysts wrote.

"The government can adopt only limited measures to decelerate the growth, which we believe should result in substantial earnings upgrades across the sector," they said.

In wider market action on Wednesday, Hong Kong's Hang Seng Index rose 1.5%, China's Shanghai Composite advanced 0.8%, Japan's Nikkei 225 inched up 0.4%, Australia's S&P/ASX 200 gained 1%, and South Korea's Kospi climbed 1.3%.

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