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Las Vegas Sands Leads Casino Owners Down on China Squeeze
Wynn Macau Ltd. (1128) fell to a four-month low, leading a decline in Macau casino operators on concerns that slower economic growth in China may hurt demand from high-stake gamblers in the world’s largest gaming hub.
Wynn Macau fell 5.5 percent to HK$19.62, the lowest level since Feb. 7, at the noon break in Hong Kong trading today. Galaxy Entertainment Group Ltd. (27) lost 4.5 percent while Sands China Ltd. (1928) also dropped 4.5 percent.
Casino stocks are declining after a cash squeeze has driven up the money-market rate and banks including Goldman Sachs Group Inc. have pared growth projections for China’s economy to 7.4 percent, below the government’s 7.5 percent goal. Deutsche Bank AG today cut its rating on Galaxy, Sands China, Wynn Macau and Melco Crown Entertainment Ltd. (MPEL) to hold from buy.
“There are rising demand risks from VIPs if China recovery slows,” Karen Tang, a Deutsche Bank analyst, noted, referring to the high rollers who contribute about two thirds of Macau’s casino revenue.
Junket operators, or the middle men who provide credit to VIP bettors, said they hadn’t felt any impact from the spike in Chinese interbank rates, according to Tang. Mainland Chinese tourists have helped turn Macau into the world’s largest gambling hub, with $38 billion in casino revenue last year, more than six times the Las Vegas Strip.
Las Vegas-based parents of Macau operators dropped overnight in New York trading amid concerns about China’s growth prospects. Las Vegas Sands Corp. (LVS), with properties in Macau and Singapore, declined 5.4 percent to $49.47 at the close in New York, the lowest since Feb. 21. Other companies with casinos in Macau also fell, with Wynn Resorts Ltd. (WYNN) down 4.3 percent.
“The slowing down of the Chinese economy will pose a bigger risk to casino operators,” said Victor Yip, a Hong Kong-based analyst at UoB Kay Hian Ltd. ’’So far we haven’t seen any worsening in VIP liquidity. The cashflow remains pretty strong within the sector.’’