Casino stocks rise in Hong Kong amid smoking bill hopes

Monday 13th of July 2015

Casino stocks surged in Hong Kong, after local media reported that the government may soften on plans to ban smoking rooms on gaming floors.

Wynn Macau jumped 5.7 percent as of 2:01 p.m. local time, as Galaxy Entertainment Group Ltd. and Sands China Ltd. rallied at least 4.7 percent, Bloomberg reported.

The stocks rose after Macau Business reported that the the government may let casinos keep smoking rooms if they can prove the health of its customers and staff is protected, citing Secretary of Social Affairs and Culture Alexis Tam Chon Weng.

Under amendments to the smoking bill, which was approved on Friday at the Legislative Assembly and will now undergo detailed discussion at one of the Assembly’s Commissions, smoking lounges and smoking in VIP rooms would be banned. Alexis Tam also pledged to review the impact of the ban three years after it comes into effect.

“It’s a squeeze, a bear-market squeeze, so anything can trigger it,” Benjamin Collett, head of Asian equities at Sunrise Brokers LLP, was quoted by Bloomberg as saying.

The smoking room report “indicates a softening of the government’s stance, and that’s positive enough to make you reduce your short position.”

Wells Fargo analyst Cameron McKnight said in a note that operators would need empirical proof that smoking rooms protect employees and customers from the effects of second hand smoke.

“If additional, internal smoking lounges are allowed, they could partially mitigate the effect of the ban on VIP revenues, and would mean mass revenues don't get worse (all else remaining equal) as smoking lounges are already on mass floors.”

According to some lawmakers, the ban could impact revenues and force gaming operators to fire or reduce the wages of up to 5,000 workers.