Melco Crown Tumbles in New York as Deutsche Bank Stays Bearish

  • Shares follow declines in Hong Kong after Deutsche's report
  • Bloomberg's China ADR index retreats for a fifth day

Melco Crown Entertainment Ltd., a Macau-based casino operator controlled by billionaires Lawrence Ho and James Packer, slumped to a three-year low in New York after Deutsche Bank AG maintained a sell rating and said gaming revenue fell last week.

The shares slipped 4.4 percent on Wednesday to $15.94, helping lead a decline in a Bloomberg index of the most-traded Chinese stocks in the U.S. Macau casino stocks had closed lower in Hong Kong earlier in the trading day after Deutsche Bank said the gaming sector was hurt last week due to a move by junket operators to reduce credit offered to high-end gamblers.

A government crackdown on corruption combined with an economic slowdown in China has curbed spending by high rollers in Macau, the world’s biggest gambling hub. Gross gaming revenue fell 19 percent to 493 million patacas ($62 million) a day last week, or 18 percent below the average so far this quarter, Deutsche Bank analyst Karen Tang wrote in a note Wednesday.

“It’s a group issue of Macau casinos where there remains a lot of concern about when and at what level the gaming business will reach an inflection point,” Tim Craighead, a Bloomberg Intelligence analyst, said in an e-mail. “Overall, the transition from a VIP-driven business to a mass-market oriented one is one that will take time.”

Junket Operators

Revenue was hurt last week due to a move by junket operators to reduce credit offered to high-end gamblers. The operators reduced lending after a reported theft at a competitor "prompted others to withdraw deposits from various junkets," Deutsche Bank’s Tang wrote.

The Blomberg China-U.S. Equity Index declined for a fifth day, losing 2 percent to trade at the lowest since February 2014. The Bloomberg Intelligence Macau Gaming Index declined more than 5 percent to the lowest since July 2012.

The week-long National Day holiday starting Oct. 1 may be “a temporary relief” for Macau’s gaming industry as Chinese tourists arrive in the city, Jeff Papp, senior analyst at Oberweis Asset Management Inc., said in a phone interview. “But I don’t see any rebounds for the industry as China’s anti-corruption campaign prolongs.”

Amid a weak market, revenue per available room in some of the hotels has dropped in the second quarter, according to Bloomberg Intelligence data, and hotels are offering steep discounts to draw more customers.

JD.com Declines

The Deutsche X-trackers Harvest CSI 300 China A-Shares ETF dropped for a second day, sliding 0.2 percent to $32.53. That followed the Shanghai Composite Index which dropped 2.2 percent on Wednesday, while Chinese stocks trading in Hong Kong fell the most in three weeks after a preliminary manufacturing gauge for the mainland unexpectedly fell to a six-year low.

Online retailer JD.com Inc. fell 4.5 percent to $24.38, the most since Sept. 4, while Weibo Corp., China’s twitter-like portal, declined 4.9 percent to $11.16, the lowest since Aug. 26.

President Xi Jinping’s comments in the U.S. on Tuesday that China’s stock market has reached a “phase of self-recovery and self-adjustment” prompted speculation that the government will pare back support for equities.

The government spent 1.5 trillion yuan ($236 billion) from the start of the selloff three months ago through August trying to control a plunge that wiped out about $5 trillion in market value, according to Goldman Sachs Group Inc.

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