Photographer: Billy H.C. Kwok/Bloomberg

Chinese Premier Casts Shadow Over Macau’s Gambling Recovery

  • Analysts warn possible Li Keqiang visit may hurt October bets
  • Gross gaming revenue to rise 4 percent in September: survey

The last time a top Chinese leader visited Macau, the trip heralded a two-year downturn in the world’s largest casino hub that only saw a return to growth last month.

On his December 2014 visit to the Chinese city, President Xi Jinping ordered Macau to diversify its economy from gambling and reinforced a corruption drive that scared away high-stakes players. Now, the casino industry is bracing for a possible visit in October by Premier Li Keqiang, with analysts warning that the nascent recovery may be threatened by his appearance in the former Portuguese colony.

Li is expected to attend a conference of ministers from China and Portuguese-speaking countries scheduled to take place Oct. 10 and 11, the city’s government-owned broadcaster Teledifusao de Macau reported on its website Aug. 30. The schedules of China’s top leaders are considered secret, and his trip has not been confirmed by the country’s foreign ministry.

That hasn’t stopped analysts including ones from HSBC Holdings Plc and Union Gaming from warning that a potential senior official’s visit would dampen gambling in the high-stakes segment for the local units of Wynn Resorts Ltd. and Las Vegas Sands Corp. At stake is Macau’s gross gaming revenue, which reversed a 26-month revenue slump in August and is expected to rise by 4 percent in September, according to the median estimate of nine analysts surveyed by Bloomberg News.

“Things might quiet down during mid-October because of the expected visit to Macau of China’s Premier Li Keqiang,” said Grant Govertsen, a Macau-based analyst at Union Gaming. “Historically, visits to Macau by high-level PRC officials have had short-term negative impacts on gross gaming revenue and we expect this same dynamic to occur in October.”

Representatives for the Macau city government’s information bureau and the Macau forum’s Permanent Secretariat said they have yet to receive confirmation from China’s government regarding senior officials’ attendance at the event. China’s Ministry of Foreign Affairs and Ministry of Commerce did not immediately respond to queries sent by fax about which senior officials’ would attend the forum.

A potential visit from a senior government official “is unlikely to bode well for VIP revenue,” according to a Sept. 27 note by HSBC Holdings Plc analyst Charlene Liu, while Credit Suisse’s Kenneth Fong wrote earlier this month that Li’s possible presence “raises concerns about traffic control around the trip.”

Supportive Signals

Still, some investors are speculating that supportive policies might be announced by Li during a visit, as recently eased business visas for conventions “signal that the central government is more supportive to Macau, especially on the development of non-gaming activities,” Fong wrote.

Casino stocks slumped on Friday, with Galaxy Entertainment Group Ltd. falling as much as 2.4 percent and Sands China Ltd. down as much as 2.2 percent in Hong Kong trading. The benchmark Hang Seng Index dropped as much as 1.5 percent.

Xi’s 2014 visit was followed by stricter scrutiny on the gambling promoters who lend money to high rollers and visa restrictions on Chinese travelers. That prompted operators from Galaxy to Melco Crown Entertainment Ltd. to introduce more family friendly casino resorts as gambling receipts plunged 36 percent last year to $29 billion from 2013’s peak.

October Drop

Casino revenue rose 1.1 percent in August, boosted by visits from recreational gamblers and tourists.

September’s gaming revenue data will be published as early as Saturday, according to the city’s gaming regulator. Las Vegas Sands’ Parisian resort, aimed at recreational gamblers, opened during the month, while the Oct. 1 start of the week-long Golden Week holiday to celebrate China’s National Day is traditionally expected to draw more tourists.

Li’s visit “could potentially result” in gaming revenue returning to negative growth in October, Govertsen said, adding that the impact is expected to be felt “exclusively at the high-end of the market.”

Macau, half of the size of Manhattan and the only place in China where casinos are legal, has long been viewed as a conduit for officials and businessmen to bypass currency controls and send money out of the mainland to safer havens.

“There’s a perception that high-rollers tend to not want to be in Macau when there are Chinese government officials visiting,” said Vitaly Umansky, a Hong Kong-based analyst at Sanford C. Bernstein & Co.

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