Some Investors Pessimistic On Macau For Second Half Of 2019

Given the negative impact the U.S. trade war with China has had on the broad Chinese equity market, Macau casino stocks have held up relatively well so far in 2019. Unfortunately, some gaming insiders are anticipating that luck will change in the second half of the year.

What To Know

Andrew Lo Kai Bong, executive director at Suncity Group Holdings, said Friday Macau gross gaming revenue could begin to fall in the second half of the year as trade war uncertainty and slowing growth in China weighs on appetite for gambling.

In addition to the trade war, Lo said events such as Macau’s 20th anniversary celebration and China’s 70th anniversary celebration in the second half of 2019 could also dampen gaming revenue growth.

Why It's Important

Lo said investors shouldn’t expect anything like the downturn in VIP gaming revenue back in 2015, when a corruption crackdown triggered a deep dip in gaming revenue, particularly in high-end gamblers.

Success Universe Group deputy chairman Hoffman Ma Ho Man also said Macau’s VIP gaming business has been worse than expected in 2019. He said falling consumer confidence and the trade war are to blame.

Earlier this month, Morgan Stanley raised its 2019 mass market gaming revenue growth estimate for Macau from 7% to 10% but lowered its full-year VIP revenue growth estimate from -6% to -14%. Overall, Morgan Stanley is calling for a 1% drop in total Macau gaming revenue this year.

Traders looking to trade the Macau dip should consider selling stocks with heavy Macau exposure such as Wynn Resorts, Limited (NASDAQ: WYNN) and Las Vegas Sands Corp (NYSE: LVS) and rotating into stocks with havier exposure to Las Vegas, such as Caesars Entertainment Corporation (NASDAQ: CZR) and Boyd Gaming Corporation (NYSE: BYD).

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