Guangdong and Fujian: Pivotal Provinces Perking Up, Could Be Harbinger of Macau Rebound
Posted on: April 29, 2020, 11:50h.
Last updated on: April 29, 2020, 12:40h.
There are signs the Guangdong and Fujian provinces of mainland China are beginning to rebound from the coronavirus outbreak. That resurgence could bring much needed good news for the moribund gaming capital of Macau.
Recent commentary from chief executives of some large US companies with significant China exposure, including industrial conglomerate 3M, indicate the world’s second-largest economy is on the mend following a dismal first quarter at the hands of COVID-19. Data confirms inklings of vibrant activity in Guangdong, the largest Chinese province and the one closest to Macau, and Fujian.
Recoveries in Fujian, especially the southern city of Xiamen, and Guangdong (China’s most populous province at 114 million) has been among the fastest,” according to new research from Bernstein.
Analysts view Guangdong’s coronavirus travel restrictions, including a 14-day quarantine policy for any outsider entering the region, as particularly punitive to Macau. That’s because the province is a major source of gamblers. Recent consensus views indicate that if the province starts to ease travel controls, others will follow, potentially renewing the flow of mainland visitors to the gaming center.
Inching Toward Normal
With gross gaming revenue (GGR) sliding, visits dwindling, and unemployment at an eight-year high, Macau is scrambling for ways to bolster its gaming-dependent economy. Those avenues include some politicians pushing higher ups to leverage the Special Administrative Region’s (SAR) close ties with Guangdong to get the province to relax travel controls.
There may be some impetus for easing visitation restrictions. Hong Kong, another major artery to Macau, has gone three consecutive days without a new coronavirus case, while the gaming center is up to three weeks without a new instance of the respiratory illness.
“If the situation remains under control, we expect Macau will gradually begin to lift travel restrictions in the latter part of May or June,” said Bernstein.
The research firm said Guangdong citizens accounted for 45 percent of visits to Macau last year.
That jibes with what executives from some gaming companies are saying. They note that if one province opens travel to Macau, particularly if it’s Guangdong, others will rapidly follow suit.
Estimates Starting to Improve
With data suggesting the Chinese economy is improving, and speculation increasing that travel bans could thaw as soon as the current quarter, some banks are offering up fewer bad estimates for the SAR’s 2020 GGR figures.
For example, JPMorgan is forecasting a 39 percent drop in Macau GGR this year, a projection revolving around some liberalization of travel controls in May or June. That’s ugly, but better than some of the estimates investors recently digested.
However, as Bernstein points out, Macau’s near-term fortunes are largely dependent on Guangdong.
“Guangdong residents have a somewhat higher propensity to gamble than those in other parts of the China,” according to the brokerage house.