Macau has been a large question mark this year with its profit margin and the resultant issues with stockbrokers. Early in 2018, many of the casino stocks reflected the ongoing issues with Macau. The stocks slid downward for much of the year, driven by uncertainty and fear of the future. However, casino stocks are rising during the last quarter of the year. Many economic forecasters believe the growth in casino stocks is only the beginning, and they expect stocks to continue to rise. While some economists are questioning the rosy economic forecast, casino watchers seem willing to bet on Macau’s rebound. The casino destination in Asia has suffered from a slowing economy and government regulation. There is also the fear of a trade war continuing with the United States that threatened to drag down the economy further. While all of those fears are still there, there are also signs that the Macau casino forecast may be a little bit brighter than expected.
Macau is home to the largest and most profitable casino area in the world. It’s 38 casinos earn over $30 billion dollars every year, which is three times more than Vegas earns in a year. Macau has seen a huge rise in gambling since the early part of the 21st century, however its history as a gambling destination is much longer. Macau, a former Portuguese colony, legalized gambling in the 17th century when the Portuguese brought gambling into the area. However, it’s a safe bet to say that those Portuguese traders did not realize that Macau would become a gambling hub.
While Macau has seen nearly 20 years of explosive growth, there have been signs that the peninsula has been slowing down. China, who now governs the area, is partly to blame for the slowdown. The Chinese government began to crack down on the casinos in 2016, when they announced a ban on government officials entertaining clients in the Macau casinos. This upset a lot of casinos, not to mention government agencies, who managed to get deals done while wining and dining clients. The government then announced it was going to look more closely at the financial transactions happening in the casinos. It was concerned about money laundering. This increased scrutiny led many high rollers to flee Macau for other areas in Asia, Australia and North America. All of these factors, coupled with an issue with the United States over trade, led to a Macau slowdown.
Some Promising Signs
Stock market experts have looked at the four largest casino companies from the United States that have casinos in Macau. Those casinos had higher than expected earnings in the country for November. Wynn Resorts, Las Vegas Sands, MGM and Melco Resorts all did better than expected in the Macau market. Economists have some observations on why the market is showing signs of improvement after two years of decline.
Economists think there are two major reasons for the profit surges in Macau casinos, and point to these signs as indicators that Macau may be on the rebound. First, Macau has shifted its casinos’ focus. While it had been known as a high-roller focused destination, with perks and junkets for wealthy gamblers, things have changed. At one time, high-rollers accounted for 70% of Macau’s business. Now, Macau is working to rebrand itself as an entertainment and attractions, destination for the whole family. If the peninsula can rebrand itself, families may end up spending more money over more days than a one-day high roller would.
In addition to the rebranding work Macau has done, the area is also benefitting from an easing of the trade sanctions talk between the US and China. Because many of the casinos in Macau are owned by American companies, there was real concern that any serious crackdown in Macau would result in casino shutdowns. These shutdowns would cost the companies billions.
It appears that if the economists are right, Macau is poised to have a great 2019.
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