Investors in Macau’s casino industry have reportedly been warned to expect gaming revenues to contract by low single digits this year due to the impacts of a cooling Chinese economy alongside that nation’s ongoing trade war with the United States.
According to a Monday report from GGRAsia, this is the opinion of investment services firm, Morningstar Asia Limited, although it went on to predict that aggregated gross gaming revenues from the enclave’s over 30 casinos would return to growth next year before recording even larger rises in 2021.
Reportedly read the Friday analysis from Morningstar…
“We now forecast Macau gaming revenue growth to decline by low single digits in 2019 before returning to growth of low single digits in 2020 and mid single digits in 2021 as the Chinese economy recovers. We do not expect the gaming sector will see a downturn as severe as 2015 as we have not seen signs of a gaming bubble this time around.”
Chinese economy slows:
The examination was reportedly authored by the investment services firm’s Chelsey Tam and came on the back of news that China’s fourth-quarter gross domestic product had grown by only 6.4% year-on-year, which represented its slowest improvement since the global financial crisis of 2007. This underwhelming statistic purportedly resulted in the giant nation’s annual figure hitting its lowest rate in 28 years at 6.6%.
VIP revenues impacted:
The investigation from Morningstar reportedly also forecast that 2019 is set to see aggregated gross gaming revenues from VIP players in Macau record drops in the ‘high single digits’ before recovering next year.
According to the analysis…
“In our estimate, mass gaming revenue growth will decelerate to low single digits in 2019 and re-accelerate to high single digits in 2020 and 2021.”
Despite the predicted looming downturn, the analysis reportedly forecast a rosy long-term future for Macau’s gaming market due to its ‘narrow-moat’ position as well as the widespread belief that every one of its six incumbent casino operators are due to have their licenses extended.
Morningstar Asia Limited further stated…
“We believe the current weak sentiment presents a good buying opportunity for long-term investors. The risks of more stringent requirements are already captured by our assumption of a 1% per year increase in gaming revenue tax for five years as all the licenses will be renewed in 2022.”