As China Opens For Travel, Macau Casino Stocks Go On A Tear

• Rich Caesar
• October 4, 2022

After a couple of turbulent months caused by the post-Covid crisis and stricter mainland China regulations, along with travel restrictions, finally some good news for the Macau gambling industry. The Macau authorities signaled that China is about to ease travel restrictions, making the world-famous gambling hub much more accessible to visitors. As a result of this news, Macau casino stocks saw a significant rise on Monday.

US Casinos Macau Stocks Going Up

The region officials believe that China is set to resume the currently paused e-visa regime for mainland travelers and group tours. According to reports, implementation of the relaxed travel requirements is set to start in November. As soon as the news broke through, Macau’s exposure received a huge boost in Monday’s market trading. Melco Resorts & Entertainment (MLCO) performed the best of the bunch, spiking up 25.5%. Las Vegas Sands (LSV) and Wynn Las Vegas (WYNN) were right behind rising by 11.7% and 12%, respectively. MGM Resorts International which has less exposure in Macau compared to its Vegas counterparts saw a rise of 4.4% intraday, before moving back down for a loss of 0.3%.

Tough Road to Recovery

Macau, the largest gaming hub in the world, is an administrative region of China, and still the only place in the country where gambling is allowed. So, it’s understandable that visitors from the mainland accounted for the lion’s share of gambling revenue of the Macau casinos. However, over the last two years, amidst the Covid-19 pandemic and restrictions implemented by the government, the profits took a dramatic dive.

Like the better part of the globe, Macau was under lockdown early in the pandemic. However, as the rest of the world entered the recovery period, Macau shut down once again last summer as the authorities attempted to retrain another Covid outbreak. These mitigation efforts by the Chinese government resulted in major losses for the region’s casino operators, with the combined loss only in the second quarter of this year totaling $478 million.

Before the pandemic started e-visas were the easiest way for tourists and gamblers to make quick visits to the city. Nevertheless, during the entire pandemic, China implemented stricter border control, including suspensions of e-visa which had a hugely negative effect on tourism.

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At the moment, to get into Macau, tourists from China first have to make a is an appointment, and wait for about a week for approval. Prior to the pandemic, about 50% of people entering Macau from China came in on individual visas, while around 25% were on group visa programs.

Macau casino stocks are nowhere near being the market leaders. US operators, such as Wynn Resorts and Sands Las Vegas are heavily affected by any change in consumer behavior in China. In addition, even before the pandemic, both casinos have been trending down as a result of a trade war between the US and China which started in 2018. Compared to 2018 high, Las Vegas Sands is around 50% below that level, while Wynn performed even worse, being down 65%. Still, with the boost received from China’s loosening of the travel requirements, casino stocks seem to finally be back on the rise.