Macau casino operators rallied the most since December on signs that the world’s largest gambling hub is weathering a slowing Chinese economy and a pullback by high rollers may be easing.
A Bloomberg Intelligence index of Macau casino shares climbed by 7 percent in early Hong Kong trading today, after data showed gross gaming revenue grew for a second straight month.
JPMorgan Chase & Co. analysts said the data was “surprisingly strong,” while Deutsche Bank upgraded its ratings on Galaxy Entertainment Group and MGM China Holdings.
“VIP demand finally seems to be stabilizing,” wrote JPMorgan’s DS Kim in a note yesterday. The analyst said the mass gambling segment continues to show strong growth, and Macau is showing no sign of “growth fatigue” yet, even with the recent protests in Hong Kong.
Galaxy climbed by 8.3 percent, the most since December 3. MGM China shares added 7.5 percent, while Sands China advanced by 7.9 percent and SJM Holdings increased by 6.6 percent.
Macau casino stocks are recovering after a 20 percent correction in May. The companies have faced challenges from the tit-for-tat trade war and slowing Chinese economy, which chased away some of the well-heeled gamblers and ended more than two years of uninterrupted revenue growth.
The VIP segment has also been lured away by the emergence of rival gaming spots in the Asia Pacific region. The results for June were the strongest sign yet that the outlook is improving.
Gambling revenue grew by 5.9 percent, better than the median analyst estimate of a 1.8 percent increase. The effect of VIPs heading for other gambling regions could be temporary, Andrew Lee, an equity analyst at Jefferies, wrote in a June 24 note, with Macau retaining favor given its convenience and easy access for the mainland gamblers.