SJM Holdings Ltd. (880) plunged by a record in Hong Kong trading as Macau casino operators lost a combined $9 billion in market value amid concern slowing China growth and slumping stock markets may damp demand for gambling.
Macau magnate Stanley Ho’s SJM, Asia’s biggest casino company by sales, declined 26 percent, the most since its listing in July 2008, to HK$10.50 at the 4 p.m. close of trading. Galaxy Entertainment Group Ltd. (27), founded by billionaire Lui Che-Woo, fell 19 percent, the most since January 2009, to HK$9.42.
A 21 percent slump in Chinese stocks in the last six months has reduced the fortunes of many of the nation’s investors, who have helped casino gambling revenue in the former Portuguese colony surge to four times that of the Las Vegas Strip. The European debt crisis and faltering U.S. growth may hurt many companies in China, where policy makers have also curbed access to credit.
“If the credit situation really goes worse, we’d see the people who normally finance the junkets cut their funding,” said Gabriel Chan, a Hong Kong-based equity analyst at Credit Suisse Group AG. “People are just pricing in the what-if.”
The People’s Bank of China has raised interest rates five times in the past 12 months to defuse the fastest gains in consumer prices since 2008, steps that have raised concern the pace of economic expansion will slow.
Economic growth in China may decline to less than 5 percent annually by 2016, according to 59 percent of respondents in the quarterly Bloomberg Global Poll of investors, analysts and traders who are Bloomberg subscribers. Growth was 9.5 percent in the second quarter.
Casino gambling revenue in Macau jumped 58 percent to 188 billion patacas ($23.5 billion) last year, driven by demand from high-stakes gamblers on junkets from mainland China. The only place in China where casinos are legal saw its gambling venues’ sales grow 47 percent to 173 billion patacas in the eight months through August.
While junket operators are “a bit more conservative” about extending credit, they haven’t had any liquidity problems, Credit Suisse’s Chan said in a Sept. 27 note to clients. Casino operators are still seeing “robust advanced hotel booking” for Golden Week holiday this week, he said.
Macau may release September casino gambling revenue this week.
SJM gained 67 percent from the start of the year to a record HK$20.65 on Aug. 1 in Hong Kong trading. Galaxy climbed 148 percent in the period to a record HK$21.85 on the same day.
“People are afraid and selling their winners,” Philip Tulk, head of Asian conglomerates and gaming research at Royal Bank of Scotland Group Plc., said in an interview in Hong Kong. “In this kind of market, anything that’s up gets sold.”
Tulk lowered his target prices on Sept. 30 for all the casino operators except for Melco Crown Entertainment Ltd. (MPEL), and downgraded SJM and Wynn Macau Ltd.’s stock from “buy” to “hold.” He raised Galaxy’s stock from “hold” to “buy” and remains “overweight” on the whole sector.
Sands China Ltd. (1928) slumped 14 percent, the steepest drop since it listed in November 2009, to HK$15.98. Wynn Macau Ltd. (1128) retreated 11 percent to HK$16.74 and Melco International Development Ltd. (200), one of the partners behind Melco Crown, fell 16 percent to HK$4.39.
MGM China Holdings Ltd. plummeted 20 percent to HK$8.21, the lowest price since June 3, when it listed on the city’s exchange. The benchmark index slid 4.4 percent.
Crown Ltd., controlled by billionaire James Packer and the other partner behind Melco Crown, fell 3.3 percent to A$7.71, the lowest since July last year, in Sydney trading.
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