ShareStocks in American casinos with properties in Macau were hit hard last week after the Chinese Government announced a tightening of restrictions to a level never previously seen. The Chinese territory will run a 45-day public consultation aimed at increasing government oversight, including appointing state officials to oversee day-to-day running of the casinos.
A Sign of Times to Come?
Beijing has been busy during the pandemic, cracking down on all manner of industries. After trashing many people’s cryptocurrency investments during most of 2020, it looks like they have now turned their attention to the gambling paradise of Macau.The CCP’s latest buzz phrase is “cultural prosperity,” which has been constantly meted out while the country is reshaped to further promote equality.
After announcing the tightening of restrictions in Macau $20bn was wiped off the market value of the affected companies, with fears that there could be more losses to come.
Wynn Resorts Ltd. lost 18% over the five days and Las Vegas Sands Corp. saw 9% chopped off its value.
Desmond Lam, associate professor in gaming management at the University of Macau, said: “It will keep the casinos more down to earth, aligning Macau casino operations more closely to the government’s as well as the community’s concerns.”
Wall Street took notice of what was happening, with banks such as JPMorgan downgrading the status of Wynn, Las Vegas Sands and Melco Resorts & Entertainment Ltd.
It wasn’t all doom and gloom, though. Louis Lau, a U.S.-based fund manager with Brandes Investment Partners LP, think the selloff was an overreaction based on uncertainty and over the longer term these stocks will likely do well.
He added that the Macau government is still relying on the casinos to provide jobs for the local community and help maintain the city’s status as a leading tourist destination for people with an interest in gambling or otherwise.
The future should still look bright for Macau but the waters might be muddied further by the expiration of all casino licenses in June 2022. Who knows how this might turn out given how much has changed in that region over the last year.
