As China retaliates against Trump tariffs, Macau gaming stocks tumble
Shares in Hong Kong stocks took a dive on Monday, dropping more than 13% as China and the US engaged in an escalating trade war. According to Macau Business, it was the steepest decline since the 1997 Asian financial crisis.
On 2 April, Trump announced new trade tariffs from 10% to 50% affecting 60-plus trade partners around the world. China was hit with a 34% tariff on imports, in addition to two rounds of 10% imposed in February and March.
In response, Beijing announced a 34% tariff on US goods, to take effect from 10 April. In the next salvo, Trump threatened an additional 50% tariff against China, for a potential total of 104%.
The administration of Xi Jingping has also filed a lawsuit against the US with the World Trade Organisation.
Macau operators feeling the pain
In the tariff war, Macau casino concessionaires took it on the chin. SJM Holdings, Melco International Development and Galaxy Entertainment hit three-year lows today (7 April), dropping 18%, 16% and 12.44%, respectively.
US-based operators – Sands China, Wynn Macau and MGM China Holdings – also went south, losing 14%, 13% and nearly 12%. All are listed on the Hong Kong Stock Exchange.
Last week, Morningstar Investment Research warned of heightened risks for American companies doing business in the Chinese gaming hub.
“We have adjusted our cost of equity assumptions for Wynn, Las Vegas Sands and MGM due to their exposure to Macao,” wrote analyst Dan Wasiolek, citing “increasing geopolitical tensions” between the superpowers.
In another jab at China, the US has added Macau to a list of “foreign adversaries”, joining Russia, Iran and North Korea.
Long term, US operators protected by expertise
Trump is defending his actions despite some economists warning of a looming global recession.
“Sometimes you have to take medicine to fix something,” he said. “We have been treated so badly by other countries. They took our businesses, they took our money, they took our jobs. They moved it to Mexico, they moved it to Canada, they moved a lot of it to China.”
Morningstar’s Wasiolek says the trade war is “moving the US further toward protectionism, a shift we see lasting for the foreseeable future”. But he believes US gaming operators in Macau will outlast the turbulence.
“While we will continue to monitor the macroeconomic enironment for our Macau-related coverage, we maintain our view that all six gaming concessions will get renewed and extended beyond the 2032 period,” when the current concessions end.
“Our stance is based on China’s desire that Macau be a world destination resort,” he said. That goal demands “the integrated resort expertise of Las Vegas Sands, MGM Resorts and Wynn Resorts”.