Deutsche Bank Says Buy Galaxy, Melco Crown And MGM China

According to Karen Tang of Deutsche Bank, China's recently announced rate cut should help spur a VIP recovery in Macau throughout 2015.

Tang notes that two more rate cuts are expected in China throughout 2015, further adding conviction to a belief that Macau gaming stocks turned positive in October.

According to the analyst, junkets have seen repayment cycles returning to normal levels as VIPs have sold properties to repay debts following the Chinese government's "relaxed" home purchase restrictions in September.

"We believe the interest rate cut's positive impact on property prices will improve junket liquidity and have a positive wealth effect on VIP players," Tang wrote. "Historically, China property prices and Macau VIP revenue had a good 73 percent correlation."

Separately, Tang notes that a recent move to open the Cotai border gates (connecting to Hengqin island) will operate 24 hours is also a positive for casino operators in the region.

The analyst recommends buying shares of Hong Kong-listed Galaxy, Melco Crown Entertainment Ltd (ADR) (NASDAQ: MPEL) and Hong Kong-listed MGM China, which is 51 percent owned by its parent company MGM Resorts International (NYSE: MGM).