China slowdown hits Macau gambling industry

macau skyline at dusk

The slowdown in the Chinese economy is having an impact in a number of areas, and one of the most notable is the effect on Macau, sometimes described as the gambling capital of the world.

There was an indication of the negative effects on the Macau gambling sector last week when Wynn Resorts announced their latest earning figures. Although Macau revenue was up more than £200 million on a year ago, the company was projecting earnings 20 percent lower than expected for the fourth quarter of 2018, and analysts have pointed to the fact that Wynn Resorts has not lost any of its market shares, suggesting that the market itself is taking a turn for the worse.

Wynn is more exposed than most US operators to the Macau market, through its two casinos on the Cotai Strip, but a downturn in the gambling industry in Macau would be bad news for all operators, and a flashback to the turbulence of 2014 and 2015, when new regulations from the Chinese government, combined with a slowing economy, saw casino revenues crash.

Credit cycles

And the economic data suggests that Wynn Resorts could have good reason to be cautious. It is known that gaming revenue lags behind mainland credit cycles by about 15 months and around a year ago, China’s government began to slow down the flow of credit.

The housing market, which is also often a good indicator, has been showing warning signs, with sales falling over 3 percent in September, and supply outstripping demand, to the extent that 22 percent of properties in China are unoccupied. New data on the credit situation in China will be released later in the week, which will give a clearer picture, but Macau’s casino operators are already bracing themselves for difficult economic headwinds over the coming months.

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