Inside Asian Gaming

INSIDE ASIAN GAMING | November 2011 6 Cover Story M acau’s VIP baccarat revenue grew by 46% year on year in October. It was the 28th straight month of year-on-year VIP GGR growth since the second half of 2009. During that time, high roller baccarat’s contribution has crept up from 64% of Macau gross revenues at the end of 2Q 2009 to 74% at the end of 3Q 2011. It looks like an unstoppable trajectory. And yet rumours of a tightening of the VIP credit market persist inside and outside Macau. Is this anything more than fallout linked to general investor nervousness about the global macroeconomic outlook? There are certainly people with vested interests in taking a contrarian position on the Macau VIP market—either because they wish to interpose themselves between the investors and the market as experts or consultants with special insight or intelligence to sell; or because theywish to rationalise their own shorting strategy.There are also people with an interest in painting the rosiest possible picture of the Macau VIP market—principally the casinos, the junket investors, junket consolidators and junkets and sub-junkets themselves. The VIP segment did, after all, supply 75% of gross revenue from all games of fortune in October—and gaming provides an estimated 95% of Macau’s total tourism revenues. But neither the doomsayers nor the rose-tinted spectacle merchants necessarily reflect the fundamentals of the Macau VIP business. Given the current global uncertainties, however, perceptions can easily end up creating new market realities. Market events during October suggest some positive correlation between negative macroeconomic news in China and downward movement in Macau gaming stocks. Monday 3rd October : The HSBC China Report on Manufacturing—based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 of China’s manufacturing companies—issued its September bulletin. It showed China’s manufacturing sector continued to contract for the third straight month in September due to weaker global consumer Very Important Period Macau’s high roller market may have reached a crunch moment after more than two years of record growth Trending down?—HSBC China’s Purchasing Managers’ Index showed a fall in August and September