Macau Casino Stocks Rally After PBOC Unveils ‘Policy Bazooka’

Posted on: September 24, 2024, 04:06h. 

Last updated on: September 24, 2024, 04:06h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Las Vegas Sands (NYSE: LVS) and Wynn Resorts (NASDAQ: WYNN) were among today’s best-performing casino stocks after the People’s Bank of China (PBOC) unveiled a series of monetary easing measures that boosted shares of Macau gaming equities.

Macau casino revenue gaming GGR
Downtown Macau is seen with Grand Lisboa and Wynn Macau casino resorts. Macau casino stocks rallied today after the PBOC lowered borrowing costs. (Image: Bloomberg)

The central bank cut its reserve requirement ratio (RRR) by 0.50%, signaling another cut of 25 basis points is on the table. The seven-day reverse repo rate was lowered by 0.20% to 1.50%. News of PBOC easing, which provided some relief to long moribund Macau casino stocks, sparked surge in volume on Chinese equity exchanges. Turnover on mainland China was 124% above the one-year average while volume in Hong Kong, where Macau gaming equities trade, was 236% above the one-year average.

KraneShares, a New York-based issuer of exchange traded funds, called the scenario close to a “policy bazooka.” Potentially pivotal to the fortunes of Macau concessionaires were the PBOC’s steps to loosen the mortgage market. The central bank cut existing mortgage rates by half a percent — a move that will benefit 50 million Chinese households and 150 million people.

Lower mortgage expenses could stoke increased discretionary spending, which could be a boon for Macau’s gaming industry. The moves by the PBOC arrived less than a week after the Federal Reserve lowered rates by 50 basis points.

PBOC Moves Meaningful to Macau Casino Stocks

Monetary easing by the Chinese central bank confirms its intent to prop up the world’s second-largest economy and Macau casino stocks responded with Las Vegas Sands gaining 5.34% on above-average volume. Wynn jumped 4.93% on turnover that was more than double the daily average. Melco Resorts & Entertainment (NASDAQ: MLCO), the other US-listed Macau operator, gained 9% on volume that was well above the usual.

The companies’ Sands China and Wynn Macau units combine to run seven integrated resorts in the lone Chinese territory where gaming is permitted. Among US-based firms that are not part of the technology sector, Sands and Wynn are among the most dependent on China for revenue, underscoring why easing by the PBOC is important.

Relaxed monetary policy could be a catalyst for Macau casino stocks in another way. It could compel international and local buyers to evaluate those names and the Chinese equity complex at large.

“The move comes against a backdrop of very low China equity ownership. The move, just prior to quarter end, will put pressure on managers to allocate.  I’ve been shocked at how low China allocations remain amongst US institutional investors,” noted Brendan Ahern of KraneShares.

More Stimulus Needed, Say Some Experts

While the steps taken by the PBOC may be seen as bold, it could take more action by the central bank to encourage investors revisit Macau casino stocks — an asset class that’s been mired in a multi-year slump.

Some experts argue that the PBOC has no choice but to take additional action because the Chinese economy remains fragile.

“Although these moves are a positive development, we expect that they will not be sufficient on their own to hold off China’s deepening economic slump,” observed deVere Group CEO Nigel Green in a note to clients. “These measures are necessary, but they must serve as the starting point of a broader strategy – not the end.”