China: Macau Casino Stocks Soar as COVID Restrictions Set to Ease

Facts

• On Monday, shares of casino companies operating in Macau soared after the tourism-dependent city said it would ease COVID restrictions for visitors from mainland China.
• Macau’s Chief Executive Ho Iat-seng said the city would start allowing group tours from the mainland, as well as establish easier e-visa rules beginning in November, with the city’s six licensed casino company’s seeing an overall stock price surge of over 10%.
• Several US casino companies were among those that saw big gains on Monday, with Sands China jumping over 13%, Wynn Macau climbing 7%, Galaxy Entertainment rising 10%, and SJM and MGM China each seeing an 8% spike.
• Ho Iat-seng said that the city’s borders will first open to the mainland province of Guongdong, followed by Shanghai, Zhejiang, Jiangsu, and Fujian, with hopes that the daily number of visitors will reach 40k compared to the 11k in August.
• The news came as a surprise to the former Portuguese colony, which relies on gambling for around 90% of its economy. Macau — which has been under strict COVID border restrictions since early 2020 — had expected easing of the restrictions to begin in early 2023.
• The move comes as US-based casino companies currently face licensing issues: Macau sets a six-license limit on its gambling industry and, though the US-based Sands, Wynn, and MGM have expected to renew their licenses, the Malaysian Genting Group has now thrown its hat into the bidding process.

Sources: Wall Street Journal, Taipei Times, Al Jazeera, Manila Standard, and Yahoo Finance.

Narratives

• Narrative A, as provided by Forbes. Though the easing of COVID restrictions is no doubt a hopeful sign, an increase in tourism won’t mean much to American casinos if they can’t renew their licenses. If China pursues a protectionist agenda and blocks US companies, it could be a sign of market decline for many US investors in the region.
• Narrative B, as provided by Market Watch. With JPMorgan and Citigroup now bullish on American casinos like Las Vegas Sands subsidiary Sands China, the only response to this news should be optimistic. While licensing agreements are, of course, unknown right now, the fact that China is re-opening its borders to Macau should be what investors are focused on.