Macau's high stakes gambling industry squeeze continues

Dec 17, 2015 10:48 AM

Macau’s high stakes gambling industry will continue to be squeezed by restrictive policies on capital outflow. According to a Bloomberg analysis of factors affecting the gaming and entertainment business as three of the biggest Las Vegas-based companies continue pushing forward with their multibillion-dollar resort projects.

Wednesday’s Bloomberg report noted that as the year draws to a close, “investors are shunning the advice of analysts by increasing their bets against casinos in Macau.

Investors are still shorting stocks because they think the analysts are wrong, according to Linda Csellak, the head of Asia Pacific Equities at Manulife Asset Management. She told Bloomberg. “They don’t believe we are close to a bottom. “The short side probably believes the worst is not over yet.”

The brief rallies in stock prices since the decline began last year have proven to be unsustainable. For instance, a 1 5 percent rebound in the Bloomberg Intelligence Index was cut short after the government announced a smoking ban on casino floors that was more stringent than operators had expected.

Gaming industry officials have pointed out that many of the government decisions that affect the experience of customers are made behind closed doors without the benefit of the public hearings and industry input of one kind or another that is common in the planning of U.S. casinos.

The prospect of cannibalization has gotten attention as China subsidiaries of companies such as Wynn, MGM and Las Vegas Sands prepare to open Cotai resorts next year. Newer properties such as Melco Crown’s Studio City, which opened in October, appear to have taken market share from older casinos.

“The industry lacks a growth engine,” Eddie Tam of Hong Kong-based Central Asset Investment.

But Csellak sounded an optimistic note. “I just can’t see things getting a lot worse.  I think it is a better buy than sell at this point.”

Phil Hevener has been writing about the Nevada gaming business for more than 30 years. Email: [email protected].