Macau's Golden Week Run Seen Fading as China Economy Slows

(Bloomberg) -- Macau’s robust Golden Week holiday performance isn’t likely to continue with concerns over China’s softening economy weighing down the gambling outlook in the world’s biggest gaming center.

Chinese tourist arrivals in Macau for the week-long holiday that ended Oct. 7 jumped 14 percent from a year earlier, according to Macau government data. Betting volume from high rollers was up more than 10 percent in the first six days of October over the same period last year, wrote Morgan Stanley analysts led by Praveen Choudhary in a note.

Still, the casinos robust performance during the holiday isn’t removing analysts’ concerns that the industry will grow at a slower pace in the next few months amid a weakening macro economy in China. The firm expects Macau gaming to grow six percent in the fourth quarter, and lowered its forecasts for this year and in 2019.

Macau casinos are among the biggest decliners in Hong Kong Monday. Shares of Galaxy Entertainment Group Ltd. slumped 6.6 percent, while Wynn Macau Ltd. fell 5.5 percent. The Bloomberg Intelligence gauge of Macau casino stocks has fallen more than 38 percent since reaching a May peak, outpacing the drop in the benchmark Hang Seng index.

Macau's Golden Week Run Seen Fading as China Economy Slows

“The Golden Week this year was very robust, better than our pre-holiday expectation,” said Andrew Lo, executive director of Suncity Group Holdings Ltd., the listed vehicle of the enclave’s biggest junket operator. “For the fourth quarter and next year, we don’t expect the performance will be as ‘golden’ as last week.”

Though Suncity’s gaming revenue climbed 16 percent during the holiday week, Lo expects a drag from China’s slowing economy and stock market slump.

That was also echoed in Morgan Stanley’s reasoning in lowering its gaming revenue growth forecast to 13 percent from 16 percent for 2018 and cut next year’s gaming receipts growth to 5 percent from 12 percent.

Golden Week’s upbeat performance “may not continue for the remainder of the month,” Choudhary and the analysts wrote. “Macau in a slowing growth environment tends to underperform.”

In contrast to Macau, Golden Week didn’t deliver a huge payoff for China. Consumption growth was softer than last year, and retail revenue growth may also underperform, according to a CICC note.

©2018 Bloomberg L.P.