Thursday, August 18, 2022

Casino stocks tumble as China macro woes add to pain

Shares in Macau’s casino operators started the year on a black note, with all recording sharp losses after weaker-than-expected Chinese economic data added to yet another month of steep declines in local gaming revenue.

SJM Holdings was the biggest loser, closing the first trading day of the year down 4.5 percent, followed by Sands China, down 3 percent on the day. Wynn Macau lost 2.4 percent, while MGM China closed Monday with a loss of 1.3 percent. Galaxy Entertainment outperformed, slipping just 0.2 percent.

U.S.-traded stocks continued the theme, with all posting declines by mid-afternoon trading. Melco Crown Entertainment was off 2.5 percent.

The latest selloff followed news that China's December manufacturing PMI came in at 49.7, slightly lower than the consensus of 49.8 and vs. 49.6 in November. A reading below 50 indicates contraction, and December's reading marked the fifth straight month of declines for China's manufacturing sector.

The data triggered a slump in mainland Chinese stocks, which caused circuit breakers to suspend trading for the first time.

“We have seen several tangible signs of economic weakness in China and believe a weak Chinese economy likely pressures Macau gaming,” Wells Fargo analyst Cameron McKnight said in a note.

It was also the first chance that investors had to react to news that gross gambling revenue fell 34.3 percent to a five-year low in 2015 of MOP 230.84 billion. However, figures for December showed a drop of 21.2 percent, which was above estimates.

Wells Fargo estimates revenues will decline around 20 percent to 24 percent year on year.

Asia Gaming Brief is a news and intelligence service providing up to date market information for worldwide executives on relevant gaming issues in Asia.

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