Shares of Macau’s two largest casino operators are heading for their first annual losses in more than four years as Chinese gamblers cut spending amid an anti-graft campaign and record bets on the stock market.
The CHART OF THE DAY compares the performance of Sands China Ltd. and Galaxy Entertainment Group Ltd. against China’s two biggest brokerages by market value in Hong Kong trading. Casino revenue in Macau slumped last month to 24.3 billion patacas ($3 billion), the lowest level since September 2012, while trading on the Shanghai and Shenzhen stock exchanges reached a high of 1.24 trillion yuan ($200 billion) yesterday.
Sands China and Galaxy Entertainment have lost at least 30 percent in 2014 as the city’s casino revenue dropped for six straight months. The two stocks surged more than 500 percent in the previous four years as an influx of mainland tourists helped Macau become the world’s largest gambling hub. Citic Securities Ltd. and Haitong Securities Ltd. have jumped more than 38 percent this year amid a world-beating rally in Shanghai shares, even after a market sell-off yesterday.
“Customers who used to wager on casino tables are probably now sitting at home betting on stocks,” said Tai Hui, Hong Kong-based chief Asia market strategist at JPMorgan Asset Management. “Investors are levering up on margin trading, or ‘using a small knife to cut a large tree.’”
The outstanding value of Chinese equity purchases using borrowed money climbed to a record 881.1 billion yuan as of Dec. 5, according to data from the Shanghai and Shenzhen bourses. The Shanghai Composite Index sank 5.4 percent yesterday, the most in five years, after jumping 25 percent in the previous four weeks to its highest level since 2011.
While mainland regulators have eased regulations on investors using margin debt to buy shares, Macau’s government has tightened visa rules for Chinese visitors and cracked down on the use of UnionPay debit cards to bypass mainland currency controls. President Xi Jinping, who has spearheaded the anti-corruption campaign, is expected to visit Macau this month.