What stocks to invest in
Today’s Election Day. Be sure to vote.
I think the results of the presidential election may have far-reaching effects on the US economy and stock market, with a Trump victory being especially bad. But that’s a topic for another day.
There are three recent developments of note in the Macau casino gambling market, one whose recent decline I badly underestimated:
–after peaking at a monthly gambling win of MOP 30.7 billion (US$3.8 billion) in February 2014 and beginning negative year-on-year comparisons that June, the market finally bottomed in June 2016. Win for that month was MOP 15.9 billion (US$2 .0 billion); yoy comparisons turned positive in August. An obvious plus.
–18 marketing employees of Australia’s Crown Resorts were detained in China last month. Their crime appears to be offering., while in China, larger-than-permitted inducements to Chinese high rollers to visit Crown Resorts properties in Australia. Since Crown also has casino operations in Macau, however, it’s not 100% clear that this is the issue. A similar situation occurred in 2015, when marketers for casinos in Korea offered illegal inducements in an effort to get high rollers to visit. For the moment, at least, this has marketers for Macau erring on the side of caution.
It’s unclear whether this is good or bad for casino operators. Running VIP gambling operations is all about controlling the cost of the rebates and amenities needed to get high rollers to commit to visit a casino and gamble a specified (large) amount. In the past, Crown has initiated price competition in this arena. At one point, the Macau government stepped in to set a cap on allowable rebates. Whatever Beijing’s motivations, it may be having the same effect now.
–profits at existing Macau casinos generally have been surprisingly strong. That’s both because of non-casino attractions like restaurants, shows and shopping, and the continuing strong evolution of a non-VIP market. Two exceptions: the Ho family legacy casinos and companies like Wynn Macau, which are opening substantial new capacity. Contrary to what one might expect,new offerings are not immediately drawing gamblers looking for novelty. Instead, the Macau experience has been slow but steady progress to full utilization, achieving that goal, say, a year after opening.
One other point: Macau has been marching to its own drummer in stock market terms over the past couple of years, driven by the course of casino win. That’s likely to continue …but it will probably be a positive rather than a negative in 2017. So Macau may act as a refuge in a time of choppy global markets.
(Note: I own shares in Wynn Macau (HK1128) and Galaxy Entertainment (HK0027), as well as a tag end of a former Sands China (HK1928) position that I’ve mostly sold (and am not inclined at present to rebuy.))
– What stocks to invest in