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The Implications Of The American Choice On Macau

Article by : Helen Nov 19, 2020

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Despite the US election being one of the most important events, it is a secondary question for Macau stocks. The Chinese government has prohibited gambling in the country; that’s why it is the main problem for Macau right now. Taking this into account, it doesn’t matter who is going to take over the presidency. However, if things will go back to normal, the US election might affect Macau stocks over the longer run.

Land-based casinos in China are not allowed to work legally, and the only places where China citizens can gamble are Hong Kong, Macau, and Taiwan. Only a national lottery and a sports lottery are regarded to be legal in all of mainland China.

During the first term, Trump has started protectionist trade wars, and for this reason, it is expected that his second term might only aggravate the situation. On the other hand, Joe Biden can nullify some tariffs that were imposed by Trump. So, there is a chance for Macau stocks to bump in a short-term period in case Biden will manage to achieve victory. Perhaps, Biden will send Ambassador Hunter to strike some deals.

Frankly speaking, no matter who wins, Macau stocks have changed. The VanEck Gaming Vectors ETF has doubled compared to March though there hasn’t been any hint of recovery. Compared to the attendance rate in September 2019, it has decreased by 78% in 2020. And there is no wonder people who are not from mainland China are not allowed to visit Macau, and the reason for this isn’t the coronavirus. No new death cases have been registered in Mainland China since April, and only 105 people died because of COVID-19 in Hong Kong. It is obvious that the problem lies in the government policy, the same as it was in 2014-2016 when there was a war against VIPs.

All the restrictions imposed on the region are artificial, and the virus itself is not a problem anymore.

Traders have bought Macau, predicting that one day it will end. Moreover, to maintain capital prices and minimize the downside risk, the money has been printing. When all is said and done, the limitations will be removed, and the only question is when. In any case, Bejing is in a bad spot.

Another interesting question is how long the major casino operators in Macau can stay afloat under such circumstances. For example, Las Vegas Sands is trying to sell its properties in Las Vegas for $6 billion. However, people from San Francisco and LA are moving the house because of lockdowns, wildfires, and other possible dangers, so it is doubtful if the buyers will be there.

The large casinos like LVS, Melco, and Wynn are drained; for example, LVS’s debt has increased by $1.5 billion while the revenues have been halved. According to the Q3 financial report of Melco Resorts and Entertainment Limited, its revenue has declined by 6.9%. Its shares lost about 30.4% since the beginning of 2020, and a quarterly loss per share was $0.66. As we previously said, Wynn Resorts’s financial report is far from being pleasant. Operating revenues fell by 77.5% or $1.28 billion compared to the same period of 2019. Adjusted Property EBITDA has significantly changed, so in the third quarter of 2019, it was $396.9 million, and in the Q3 of 2020, it has dropped to $65.9.

Because of the lockdown, the hotel occupancy rates and visitation statistics are ridiculous, and unfortunately, the situation hasn’t improved.

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