Macau shares take a hit

China is one of the world’s largest economies, so it is therefore unsurprising that it is second only to the United States when it comes to the total gambling losses which are accumulated each year. As of February 2017, annual gambling losses (stakes minus payouts, expenses excluded) exceeded $60 billion. Given the size of the population, this is not a surprising figure; however, given that gambling is actually illegal in China, and the only casinos permitted are in specially designated economic areas, this is quite a feat.

The casinos, in the areas of China where they are allowed to trade, have historically seen astronomical profit levels. However, on 26th July 2017, they saw a significant slump in the prices of their shares compared to the stock listings of companies across different industries on China’s Hang Seng Index.

Shares for Wynn Macau dropped by 3.6% even though their profits over the last quarter have seen an increase of 58%. The Wynn Palace Resort in Macau was only opened to the public at the end of 2016, so it is still very much early days for this arm of the business. However, the significant drop in share values seems to have caused a domino effect, with a downward trend now visible for most of the publicly traded casinos in Macau.

Galaxy Entertainment Group, one of Asia’s largest casino businesses, was not exempt from the trend, with their stocks in China falling by 1.9%. Sands China showed a much less dramatic fall in share prices, but they still did not manage to escape the downward trend, with an overall fall of 0.7%. These falls in shares come at a time when the index overall is growing, showing this downturn is specific only to the gambling industry in China and is not the result of a generally slowing economy.

This downward trend could be the market’s reaction to an increasingly competitive market across Asia as a whole. The news in January that Japan would be joining the market as a serious competitor for Asian gambling tourism threatened the future of Macau as we currently know it. You can read more about this risk to China’s casino profits here.

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