Local casino stocks soared last week, despite the gloom surrounding the outlook for Macau’s gaming market in 2009.
If anything it was further evidence of the volatility in equities markets generally and the frequent disconnect between day-to-day stock prices and company fundamentals.
The rally started in New York with a 20 percent surge in Las Vegas Sands Corp’s shares, which closed at a five week high of USD7.50. It was apparently fuelled by speculation that Beijing would relax visa restrictions as part of economic stimulus measures to help Macau.
On the back of that excitement, Galaxy Entertainment Group rose 40.24 percent, or 33 HK cents, to close at a two-month high of HKD1.15 per share. SJM Holdings rose 27.89 percent, Melco International Development 25.25 percent and Shun Tak Holdings 17.65 percent.
Global sentiment, China’s restrictions on its Individual Visit Scheme for travellers to Macau and a reported credit crunch among VIP gambling junket operators have all contributed to a near collapse in Macau-related gaming stocks in the second half of 2008.
Macau’s gaming revenue fundamentals haven’t yet reflected this level of bearish sentiment. Gross gaming income did though suffer slight year on year falls in growth during September and October before recovering slightly to expand 2.6 percent in November. The performance was in marked contrast to the 51.6 percent year on year revenue growth in the first eight months of the year. A number of investment analysts are predicting a fall in Macau’s gaming revenue for 2009 anywhere between 14 percent and 19 percent.
Even after last week’s share price rally, stocks in the territory’s six licensed casino operators were down anywhere between 57 percent and 93 percent compared to the beginning of this year.
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