Casino stocks in Macau have surged following the announcement of new legislation in the Chinese enclave. A Bloomberg Intelligence gauge of casino shares jumped as much as 12% on Monday, the most in more than six years. Wynn Macau, Sands China and Galaxy Entertainment Group each posted double-digit gains.
The favorable news comes after Macau officials announced on Friday that casino licenses in the world’s largest gambling hub would remain at the current six license cap, while their duration will be halved to 10 years from 20, with a possibility to be stretched by another three years.
The decision comes as the six current casino licensees approach the expiration of their current permits, set to cease in June. The government decided not to go forward with a plan to directly supervise the casinos in the new legislation after feedback from the operators.
Sands Macau.
The changes to Macau’s gaming law have been described as agreeable and gentler than initially expected. Operators feared some of the most unpopular proposals, in particular the appointment of government representatives to supervise operations, would be included in the legislation.
Moreover, the Macau government announced no current plans to increase the level of taxes on the industry, while current licenses will stay in place until the new law is implemented. This has further eased investor concerns about what the new legislation would imply, leading to stocks surging in response.
On Friday, US-listed stocks also experienced a similar climb, further reports Bloomberg, after Macau paved the way for all current operators to seek a renewal for their permits. The revisions remove most key concerns experienced by investors, and may lead to a “significant revaluation of the sector,” according to Citigroup analysts.
The newly-announced license conditions took into account input from a consultation period launched in September 2021, aimed at reviewing and changing rules for the casino market. Respondents showed support for plans to keep the number of operators allowed in the market at the current total of six, while halving the duration of the licenses.
The new legislation also mandates casino operators to increase the amount of capital to 5 billion patacas ($623.67 million) from 200 million patacas, and increase the requirement for a Macau-based director of the company to hold 15% from 10%.
Moreover, officials have committed to cap public floats at 30%, which Ku Mei Leng, Chief of Macau’s Office of the Secretary for Economy and Finance, said would “improve supervision” of the gaming industry. The cap to public floats was not originally included in the gaming review proposal.
Investors initially feared stronger measures to increase Chinese control over the sector. Authorities in the region had tightened scrutiny of the sector as of late, including officials clamping down on the junket business amid concerns of money laundering and illicit capital flows from mainland China.
The new gaming bill has already been sent to the local legislature, where it is expected to pass, given most government proposals are greenlighted by Macau officials. The news comes as Macau posted $10.9 billion in gaming revenue last year, up 44% from 2020, but still down 70% from pre-pandemic levels amidst China’s harsh zero-tolerance policy for coronavirus cases.
Linda Chen, Vice Chairman and Executive Director of Wynn Macau.
While pandemic restrictions and the junket market clampdown are expected to heavily impact the industry, making its future performance hard to predict, Linda Chen, Vice Chairman and Executive Director of Wynn Macau, said earlier this month she is confident Macau will achieve the government-estimated gross gambling revenue of MOP100 billion ($12.4 billion) this year.
Operators now feel confident of being relicensed for their casino operations, while tourist arrival counts on the first days of the new year have been described as a solid starting point. Should the pandemic situation remain stable in the city, experts believe the tourism outlook for the year could be positive.
Original article: https://www.yogonet.com/international/news/2022/01/17/60973-macau-casino-shares-hit-highest-in-six-years-after-favorable-new-gaming-legislation
