Macau Casino Stocks Face Elevated Risk Amid US/China Trade Spat

Posted on: April 7, 2025, 04:30h. 

Last updated on: April 7, 2025, 10:25h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.
  • Macau casino stocks slumps as global stocks tumble
  • US/China trade war seen weighing on gaming equities

A fresh US/China war featuring reciprocal and retaliatory tariffs is plaguing Macau casino stocks, elevating risk in the already lagging group.

Macau hotel room inventory
The Venetian Resort in Macau. Casino stocks there are viewed as vulnerable to a new US/China trade war. (Image: AFP)

Last week, shares of Las Vegas Sands (NYSE: LVS), MGM Resorts International (NYSE: MGM), and Wynn Resorts (NASDAQ: WYNN), units of which run a combined nine integrated resorts in the Chinese territory, slumped an average of 13% after the Trump Administration unleashed “Liberation Day” — a spate of trade levies aimed at a slew of US trading partners, including China.

Beijing fired back, announcing China would lift levies by 34% on all US imports entering the world’s second-largest economy. Morningstar analyst Dan Wasiolek said the White House’s protectionist posture could be in place for the “foreseeable future,” which increases the risk premium pertaining to US-based Macau names.

As a result, we have added a risk premium to the cost of equity of 1.5% for narrow-moat Las Vegas Sands (about 60% of its EBITDA is estimated to come from Macao by the end of the decade) and of 0.5% for no-moat MGM (20%), while we maintain the 1.5% premium already modeled for narrow-moat Wynn (50%),” observes the analyst. “The risk premiums harmonize with 1.5% country risk premiums for narrow-moat companies Sands China, MGM China, and Wynn Macau.”

The move by Trump arrived after the Committee on Foreign Investment in the United States (CFIUS) in February — at the behest of the president — included China, Hong Kong, and Macau on its list of foreign adversaries.

Macau Casino Stocks Among Most China Dependent

Financial markets’ response to Liberation Day has been anything but liberating, with investors fretting about the effects of trade levies on sectors such as agriculture, industrials, and technology.

As percentages of earnings revenue, Sands and Wynn are among the most China-dependent US-based companies. That highlights the group’s vulnerabilities to another US/China trade spat.

For several years, Macau casino stocks have been laggards as gross gaming revenue (GGR) in the casino enclave has yet to reach the heights seen before the coronavirus pandemic. Further hindering the asset class over that time was weakness in the broader Chinese equity market and significant, negative credit events in the country’s real estate sector. With risk rising, Morningstar pared its fair value estimates on Sands and MGM, the latter of which is the majority owner of MGM China.

“Our reduced fair value estimates are $53 per share for Las Vegas Sands ($56 prior) and $46 per share for MGM ($49 prior). Meanwhile, our fair value estimate on Wynn’s shares remains at $111,” adds Wasiolek.

Trump said he’s willing to work with China, but only if that country does something to narrow its significant trade surplus with the US.

“We have a trillion-dollar trade deficit with China, hundreds of billions of dollars a year we lose with China. And unless we solve that problem, I’m not going to make a deal,” said the president last week.

Longer-Ranging Outlook for Macau Casino Stocks

Over the near to medium term, Macau casino stocks face headwinds assuming the US and China cannot come to terms on trade.

It’s a sequel to the goings on during Trump’s first term when he explicitly targeted China in trade negotiations, much to the chagrin of some gaming executives. Additionally, trade tensions between the two countries don’t imply the US operators are at risk of losing their Macau licenses.

“While we will continue to monitor the macroeconomic environment for our Macao-related coverage, we maintain our view that all six gaming concessions will get renewed and extended beyond the 2032 period,” concludes Wasiolek. “Our stance is based on China’s desire that Macao be a world destination resort, which we think requires the integrated resort expertise of Las Vegas Sands, MGM, and Wynn.”