A resurgence

As nationwide protests against a draconian no-COVID policy cause shares in most China and Hong Kong businesses to lose value, casinos in China’s Special Administrative Region (SAR) of Macau are seeing the benefits of a new batch of license approvals.

Wynn Macau and MGM China spiked 14% and 11%, respectively

Bloomberg News reported Monday that shares in two of Macau’s gaming giants Wynn Macau and MGM China spiked 14% and 11%, respectively. Macau-based gaming lawyer Carlos Lobo shared the reason for the market’s optimism via Twitter:

The Macau government has announced it will award new ten-year gaming licenses to the big six incumbents Wynn, MGM, Sands China, and the Asia-based Galaxy Entertainment, Melco Resorts, and MJM Holdings.

The market’s significant upturn signals a collective sigh of investor relief after uncertainty that one of the big six might lose out in favor of new bidder Genting Malaysia. The snubbed group headed by Malaysian Chinese billionaire Tan Sri Lim “did not immediately respond to Reuters request for comment.”

Relief for the big six

According to Today, stock in Macau’s big six casino operators rose between 1.2% and 12.1% on Monday after each incumbent learned of the new licenses effective January 2023. While there has been no statement yet from Macau authorities as to why Genting missed out, it comes as a surprise to some.

Asia-facing analysts and executives believed Lim’s bid had a strong chance of claiming a license at the expense of one of the six incumbents. Genting Malaysia’s non-gaming pedigree and mass market appeal seemed right up Beijing’s street in a move to diversify Macau away from gambling.

According to Bloomberg, SAR authorities stated over the weekend that “negotiations would continue with the winners on details for the final contracts, including how much they need to invest in non-gaming sectors.” 

Details aside, as JPMorgan research analyst DS Kim wrote in a note Sunday:

One of the biggest overhangs of recent years is now removed.”

Kim added that the license renewals “could serve as a strong stock catalyst because many investors — especially long-only — were largely staying away from the sector given this ‘tail risk.’”

China’s widening crisis

Macau’s gambling stock surge comes despite unrest in mainland China regarding the government’s strict no-COVID policy. These restrictions have essentially brought the gambling mecca to its knees since the beginning of the pandemic in early 2020.

This COVID Zero policy uncertainty and the protests sweeping China still haunts wider market confidence, with the Financial Times reporting on Monday morning that Hong Kong’s Hang Seng Index nosedived 4.5%, the highest dip in a month. 

China’s CSI 300 index of Shanghai- and Shenzhen-listed shares fared slightly better but also took a beating, dropping as much as 2.8%.