Analysts: Remote Chance US Casino Operators Lose Macau Concessions Due to Trade War with China

Posted on: June 27, 2019, 11:49h. 

Last updated on: June 27, 2019, 12:30h.

Gaming analysts say US casino operators licensed in Macau, the world’s richest gambling hub, shouldn’t be impacted by President Donald Trump’s ongoing trade war with China President Xi Jinping.

casino operators Macau Sands MGM Wynn
The odds are long that China might force Macau officials to revoke licenses for US casino operators in the enclave. (Image: Dickson Lee/South China Morning Post)

In a recent note, Sanford C. Bernstein gaming analysts Vitaly Umansky, Eunice Lee, and Kelsey Zhu say the US-China trade war that continues to threaten the global economy has little chance to disrupt the Macau casino licensing renewal process. The three US-based concession holders in the Chinese Special Administrative Region (SAR) – Las Vegas Sands, MGM Resorts, and Wynn Resorts – will see their permits expire in 2022.

“Whenever US-China trade tension heightens, investors start questioning if the US casino operators would lose their Macau gaming concessions,” the memo explained.

“While we acknowledge the souring US-China relationship heightens this risk, we view the scenario where one or more of the US casino operators loses their gaming concession to be remote, unless the relationship sours significantly further into a Cold War environment,” the analysts concluded.

In May, Trump implemented $200 billion worth of higher tariffs on Chinese imports. Xi countered by raising fees on incoming American goods by $60 billion.

Temporary Truce

The leaders of the two world superpowers are in Japan for the G20 Osaka Summit. Prior to their arrival, reports have surfaced out of DC and Beijing that Trump and Xi agreed to delay any further heightened tariffs until after they meet one-on-one, which is scheduled for Saturday.

The Trump administration has threatened to place a 25 percent levy on Chinese goods that are not currently taxed.

The reality … is President Trump could always have a change of heart,” a source close to the negotiations told the South China Morning Post and Politico. “But the truce cake seems to have been baked.”

The International Monetary Fund (IMF) says the US and China are the two richest economies on the planet in terms of nominal gross domestic product (respectively $19.39 trillion and $12.01 trillion). Japan, the host for the G20 Summit, is a distant third at $4.87 trillion.

Bargaining Chips

The Bernstein analysts don’t believe Sands, Wynn, and MGM will be thrown onto the trade war table to give Xi an upper hand. Not everyone agrees.

Sheldon Adelson – the billionaire owner of Sands – has been the Republican Party’s largest donor in each of the last two elections, and played a critical role in Trump winning in 2016. The 85-year-old casino tycoon is expected to again open his deep pockets to make sure his former casino colleague keeps residence in the White House.

Steve Wynn, the disgraced Wynn Resorts founder who is no longer with the company after his alleged sexual misconduct scandal, has also been a robust support of the GOP.

In December, gaming analyst Steve Vickers opined, “The US-owned Macau casinos are sitting on what could be called a geopolitical fault line. To date, the Chinese have been quite careful not to escalate the conflict into a direct assault on US interests. But, it remains to be seen what the current attitude is towards Macau and the huge cash outflow associated with the large US casinos.”