Macau casino stocks jump on tariff ceasefire
Shares of US-based Macau casino stocks enjoyed a bump this week on news that Beijing and Washington had agreed to a 90-day pause on tariff hikes.
On Monday, share value of Wynn Resorts, Las Vegas Sands and MGM Resorts — three of Macau’s Big 6 casino concessionaires — rose by roughly 8%, 7% and 5%, respectively, Investopedia reported. On the same day, the S&P 500 was up 3%.
Chief executive offers reassurance
The Asia-facing units may also be reassured by comments from Macau Chief Executive Sam Hou Fai. At a press conference Tuesday, Sam said the Chinese special administrative region will not punish American operators for actions out of Washington.
“As long as they follow Macau’s laws and conduct their activities in an orderly and lawful manner, [the operators] are protected and supported” by the SAR, he said.
Sam acknowledged “profound changes reshaping the international geopolitical landscape” and “intensifying competition in the tourism and gaming sectors”. Those factors, along with Macau’s over-reliance on gaming for tax revenue, limits the city’s “capacity to withstand economic shocks”.
He reiterated the call for “appropriate economic diversification fostering the city’s sustainable socioeconomic development”.
The government’s “1+4” plan for growth, established in 2023, emphasises the development of international tourism and hospitality bolstered by four new economic pillars. They include Chinese health, finance, technology and the meetings and convention trade.
In comments before his December retirement, former CE Ho Iat-Seng said the government’s goal is not “to compress the gaming industry”. It is, rather, to “grow the pie” by expanding other sectors. Chinese President Xi Jinping has also stressed the importance of “new industries with international competitiveness”.
Casino operators are required to do their part. Through 2023, they must invest a collective MOP130 billion ($16.1 billion) in non-gaming attractions and local infrastructure.
US operators ‘unlikely’ to face ouster
As recently as April, Fitch Ratings warned that American operators in Macau could be “subject to retaliation” by the government due to US-China tensions. The soft Chinese economy was “likely to pressure gaming revenues and earnings”. However, the agency added, “healthy balance sheets and ratings headroom” could mitigate the risks.
Fitch said Sands had “ample rating headroom” and abundant liquidity. MGM and Wynn also had “adequate rating headroom at current levels”.
Moreover, as Sam noted, “Foreign investments are highly welcomed in the Macau SAR. This is one of the goals outlined in my recent policy address. As long as they comply with local regulations, all foreign investments will be protected and supported.”
Presently, the gaming industry contributes about 80% of Macau tax revenue. Wynn, Sands and MGM represent more than half of gross gaming revenue in the jurisdiction. Termination or non-renewal of their licences is “highly unlikely”, per Fitch.