Las Vegas Sands and Wynn Resorts emerged as today’s top performers in the casino stock market after the People’s Bank of China (PBOC) unveiled a series of monetary easing measures that invigorated shares of Macau gaming equities. This came as welcome news in Macau, where the casino industry has been struggling. The PBOC lowered its reserve requirement ratio by 0.50% and hinted at a potential additional cut of 25 basis points. Furthermore, the seven-day reverse repo rate was reduced by 0.20%, bringing it down to 1.50%.
These announcements provided a much-needed boost to long-stagnant Macau casino stocks, igniting a surge in trading volume on Chinese equity exchanges. Turnover on the mainland was 124% above the one-year average, while Hong Kong, home to many of Macau’s gaming equities, saw volume soar to 236% above the one-year average.
KraneShares, a New York-based issuer of exchange-traded funds, described the scenario as akin to a “policy bazooka.” Particularly important for Macau’s gaming revenue was the PBOC’s decision to loosen the mortgage market. The central bank cut existing mortgage rates by half a percent, benefiting 50 million Chinese households and 150 million people.
Lower mortgage expenses are expected to free up more discretionary spending, potentially benefiting Macau’s gaming industry. The PBOC’s moves followed a similar rate cut of 50 basis points by the Federal Reserve just a week prior.
The monetary easing by China’s central bank demonstrates its commitment to bolstering the world’s second-largest economy. Las Vegas Sands saw a 5.34% increase in stock value on above-average volume, while Wynn Resorts jumped 4.93% with more than double the usual daily turnover. Melco Resorts & Entertainment, the other US-listed Macau operator, gained 9% on significantly elevated trading volume.
Sands China and Wynn Macau, subsidiaries of their respective parent companies, operate seven integrated resorts in Macau, the only region in China where gaming is legally allowed. For these companies, which are heavily reliant on China for revenue, the PBOC’s relaxed monetary policies are crucial.
The easing measures could also attract both international and local buyers to reconsider investments in Macau casino stocks and the broader Chinese equity market.
“The move comes against a backdrop of very low China equity ownership. The move, just prior to quarter end, will put pressure on managers to allocate. I’ve been shocked at how low China allocations remain amongst US institutional investors,” remarked Brendan Ahern of KraneShares.
However, some experts believe that the PBOC’s actions might not be sufficient. They argue that additional measures will be necessary to stabilize the fragile Chinese economy and reinvigorate Macau casino stocks, which have been in a prolonged slump.
“Although these moves are a positive development, we expect that they will not be sufficient on their own to hold off China’s deepening economic slump,” stated deVere Group CEO Nigel Green. “These measures are necessary, but they must serve as the starting point of a broader strategy – not the end.”
