Hong Kong Uprising Could Actually Help, Not Hinder Macau, Analysts Say

The continuing pro-democracy uprising in Hong Kong, also known as the Anti-Extradition Law Amendment Bill Movement, could potentially drive more visitors to Macau, not deter them from visiting the gambling center, according to Bernstein analysts.

The protests, which have stretched into a 16^th week, have usually been contentious and, at times, violent. Over the weekend, tensions flared as demonstrators tussled with authorities across Hong Kong, as international media agencies reported protesters setting fires and lobbing petroleum bombs at police, prompting responses of tear gas and rubber bullets from authorities.

Bernstein isn’t the first research firm to forecast a muted impact from the geopolitical upheaval on Macau gross gaming revenue (GGR). Last month, JPMorgan made similar comments, saying the Hong Kong turmoil would have a smaller impact on Macau gaming revenue than on visitation.

Although visitors from Hong Kong (as defined by travel documents used when entering Macau) make up on average 17% to 19% based on our conversations with casino operators and junkets, Hong Kong residents make up less than 10% of mass GGR,” according to the Bernstein analysts.

The research firm notes gamblers from Mainland China, not Hong Kong, account for the largest percentage of Macau’s VIP and mass market turnover.

Conflicting Opinions

There may be something to the notion that the Hong Kong demonstrations could actually work in Macau’s favor, but there are also conflicting views. Last month, the Gaming Inspection and Coordination Bureau (DICJ) said GGR at the Special Administrative Region (SAR) slid 8.6 percent, good for the third-worst monthly performance this year.

Some Wall Street analysts have also trimmed 2019 estimates on Macau operators, including Las Vegas Sands and Wynn Resorts, mentioning the geopolitical tensions in Hong Kong as part of the reason for the lower forecasts.

Bernstein points out that most VIP players come to Macau directly from Mainland China, while mass market gamblers flying to the gaming hub are on flights that usually stop in Hong Kong. Service at Hong Kong’s international airport was disrupted for several days in August because of the demonstrations.

Crackdown Could Help

In response to the protests, the Chinese government has created more restrictions for tourists looking to visit Hong Kong, moves that could ultimately work in Macau’s favor.

“The Chinese authorities have created more limitations to visit Hong Kong as a result of the protests, and in China, sentiment against visiting Hong Kong has been on the rise,” said the Bernstein analysts. “However, Macau remains disciplined, with no protests and with a pro-China sentiment clearly evident. These factors may help support Macau visitation.”

On Tuesday, Goldman Sachs upgraded shares of Wynn to “buy,” noting that investors have gotten too doubtful on the stock and that Macau GGR is likely to turn for the better.