The recent outbreak of pneumonia in China is threatening to impact the short-term recovery of Macau’s gaming industry after Macau gaming stocks fell by up to 6.5% on concerns over the virus on Monday.
The share price of all five Hong Kong-listed gaming operators declined by more than 5% on Monday with MGM China the hardest hit, falling 6.5% to HK$13.80 per share, and SJM Holdings by 6.38% to HK$9.83.
Sands China (5.89% to HK$42.35), Galaxy Entertainment Group (5.39% to HK$58.85) and Wynn Macau (5.28% to HK$19.56) also suffered significant declines, while Melco International Development Ltd – the parent company of Melco Resorts & Entertainment – fell 3.5% to HK$20.70.
In a Monday note, analysts from brokerage Bernstein warned that the pneumonia outbreak, believed to have originated in Wuhan late last year, could have a lasting impact on Macau’s gaming operators.
Macau’s casino regulator and the Health Bureau have been assisting casino operators with purchasing and installing body temperature detection equipment since early January (given fever is a common symptom with this virus), to strengthen virus prevention and control measures,” analysts Vitaly Umansky, Eunice Lee and Kelsey Zhu said. “Greater inspections are taking place at Macau and Hong Kong border crossings.
“Should the outbreak get worse, it would likely negatively impact travel and reduce visitation to Macau, thereby impacting the gaming industry’s recovery. While to date the virus impact has been more muted, any major spread that begins to disrupt travel would be negative for Macau stocks.”
There have so far been more than 200 confirmed cases and three deaths as a result of the new virus, which is already being compared to the deadly SARS virus that killed 774 people in the early 2000s. The majority of cases have been in Wuhan, however there are also reports that it has been detected in Beijing, Shanghai and Shenzhen as well as in Japan, South Korea and Thailand.
Despite concerns in Macau, JP Morgan’s DS Kim, Derek Choi and Jeremy An said there was no sign yet of the virus impacting gross gaming revenue in the lead-up to the traditionally strong Chinese New Year period.
“We’ll monitor the situation closely, but so far our checks reveal no discernible impact from this news yet (CNY hotel booking still remains very robust, with no signs of significant cancellations),” they said.