JPMorgan Sees Muted Macau Impact From Hong Kong Protests, Markets Say Otherwise

Posted on: August 19, 2019, 06:00h. 

Last updated on: August 19, 2019, 01:18h.

Intensifying protests in Hong Kong that now span multiple months and last week forced the closure of the international airport are one reason shares of gaming companies with Macau exposure recently tumbled. But JPMorgan forecasts only a modest impact on gross gaming revenue (GGR) at the world’s richest casino center.

Hong Kong protesters brave rain on Sunday. Analysts don’t expect calamity there to hurt Macau gaming revenue. (Image: Vox)

Amid escalating trade tensions between the US and China and the Hong Kong upheaval, which has grown in vigor as more threats from the mainland have been levied, shares of Las Vegas Sands (NYSE:LVS) are lower by 18.55 percent, month-to-date. The largest US casino operator by market value has five gaming properties in Macau. Rival Wynn Resorts Ltd. (NASDAQ:WYNN), which runs the Wynn Macau and Wynn Palace, is off nearly 22 percent since Aug. 1.

Actual impact on [Macau’s] gaming demand should be smaller than on visitation,” said JPMorgan’s Asia-Pacific team in a recent note.

The bank notes that while the Hong Kong-Zhuhai-Macau Bridge, an important thoroughfare for getting gamblers from Hong Kong to Macau, has been affected by the protests, would-be visitors to the gaming hub can use the Shenzhen and Zhuhai airports, or the Hong Kong ferry.

“Chinese visitors via Hong Kong ferry are typically package tourists or (very) low-end players anyway,” said JPMorgan analysts.

Protests Pinch Profits?

Earlier this month, analysts from multiple brokerage houses trimmed August GGR estimates for Macau, citing weak VIP numbers and the Hong Kong uprising. The protests stem from an effort by Beijing to force the Special Administrative Region to extradite criminals to the mainland, where the legal system is far more complex and likely to hand down harsher punishments.

On Sunday, more than 1.5 million members of the pro-democracy movement took part in a peaceful demonstration, ignoring a law enforcement ban on such activities in the process. Anger against the extradition bill has morphed into allegations that Beijing is wielding too much power in Hong Kong, and there are calls for democratic reforms.

Led by the Civil Human Rights Front, Sunday’s opposition rally, held amid torrential rainfall, was indeed peaceful, according to the government there. But policymakers also confirmed that protesters are clogging up major transportation arteries, potentially impacting commerce and tourism.

While JPMorgan’s thesis that geopolitical tensions in Hong Kong may prove to be a small hurdle for Macau operators, markets aren’t yet agreeing. Despite jumping almost two percent last Friday, LVS shares shed nearly three percent last week, and the MSCI Hong Kong Index is lower by 11.5 percent this month.

Not Much Of A Slowdown

JPMorgan acknowledged that getting a handle on Macau’s August GGR at this point is difficult. But the analysts noted there hasn’t been a slowdown in foot traffic at the peninsula’s gaming properties commensurate with significant geopolitical headwinds.

Our on-the-ground checks suggest that there has not been a discernible slowdown in casino traffic yet (though this could be due to strong seasonality, given the summer holiday), while actual GGR impact is difficult for us to check,” said the bank.

Macau tourism officials acknowledge the region’s tourism trade is vulnerable to a slew of external factors, including those of the geopolitical variety. But they concur that casino visits have been steady this month.