Macau's Chief Sees 2017 Economy Returning to Growth on Casinos
Comment of the Day

July 28 2016

Commentary by Eoin Treacy

Macau's Chief Sees 2017 Economy Returning to Growth on Casinos

This article by Daniela Wei for Bloomberg may be of interest to subscribers. Here is a section:

“Macau’s gaming industry and the whole economy will continue to adjust, but the decline may shrink to 7.2 percent this year and even resume growth in 2017,” Chief Executive Fernando Chui said in a televised session of the city’s legislature Wednesday. “It’s a good time for Macau to re-position after a 25-month gaming revenue drop.”

Gross domestic product in Macau declined 20.3 percent in 2015, worsening from the 0.9 percent drop the year before, as the world’s largest gambling hub was hurt by China’s anti-corruption campaign that scared off high-rollers. The casino industry, which accounts for half of Macau’s GDP, is in the midst of a casino building boom to boost revenue from mainstream gamblers and tourists.

Recreational Gamblers
​Macau’s government is working with its six casino operators to “improve synergies” between gaming and non-gaming pursuits, Chui said. The city is trying to reduce its reliance on gambling and is targeting to raise the proportion of casinos’ non-gaming revenue to 9 percent by 2020 from 6.6 percent in 2014

Eoin Treacy's view

The outlook for the gaming sector and China are inextricably linked. Macau represents a much larger gambling market than even Las Vegas and that city also depends on the largesse of Chinese high rollers to drive profitability. With the outlook for growth improving in Macau that may be an initial sign that the Chinese tourist market is still healthy.

The China Enterprises Index H-Shares Index is testing the region of its trend mean and a sustained move above it would signal a return to demand dominance beyond short-term steadying.

The Market Vectors Gaming ETF trended lower for most of 2014 and 2015 before rallying from early this year to break the progression of lower rally highs. It has been consolidating that move since April but is firming once more within the range and a clear downward dynamic would be required to question medium-term scope for additional upside.

US listed has been the subject of some acute bouts of volatility over the last few years but has continued to hold a medium-term progression of higher reaction lows. A sustained move below $37.50 would be required to question the upward bias. 

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