Macau casino stock rally to be short-lived, analysts warn

Macau casino stock rally to be short-lived, analysts warn

The bulls have kept pushing Macau casino stocks higher in the past few days thanks to the better-than-expected Macau casino gaming revenues but analysts warn that the rally will be over in a blink of an eye.

Macau casino stock rally to be short-lived, analysts warnCNBC News reported that traders are still in a wait-and-see mode in terms of betting on Macau casino stocks despite Macau’s September gross gaming numbers rising 7.4 percent from last year.

“Although the global backdrop for the overall economy is decelerating, these stocks have moved higher based off of the fact that they believe that China has stabilized,” Chad Morganlander, a portfolio manager at Stifel Nicolaus, said on CNBC’s “Trading Nation.” “We don’t believe that to be the case.”

According to Morganlander, the persisting Chinese economic malaise will continue to affect Macau’s economic performance in general.

“Going into 2017, we believe there will be GDP growth in China of roughly 2 percent,” added Morganlander. “That will not bode well for the Macau industry as a whole.”

Financial expert and “Crossing Wall Street” Wall Street blog editor was more pessimistic toward Macau casinos as he predicted that the present rallies will halt sooner than investors may think.

“Macau had 26 straight months of declining revenue,” Elfenbein told the news agency. “They finally turned the corner, so that looks good for them, but these stocks, the run they’ve had since the summer, I think they’re just too rich right here.”

Macau gaming revenue rose a better-than-expected 7.4% in September, the second straight year-over-year gain after a 26-month decline, helped by two massive casino openings in the world’s No. 1 gambling destination.

Figures released Saturday by Macau’s Gaming Inspection and Coordination Bureau (DICJ) showed casino gaming revenue hitting MOP 18.4b (US $2.3b) in September, up 7.4% from the same month last year. Since the release of Macau’s gaming revenue data, shares of MGM Resorts, Melco Crown Entertainment, Wynn Resorts, and Las Vegas Sands are on the green.

“We are encouraged by the second consecutive positive monthly [comparison],” Stifel gaming analyst Steven Wieczynski wrote in a Monday research note. “That said, we continue to expect trends to remain choppy in the near term, particularly on the mass side of the business, as the market works to fully absorb recent and forthcoming supply additions.”

Despite the good news, analysts are already suggesting that October will have a tough time sustaining the market’s new momentum. It’s still unconfirmed at this point, but China’s Premier Li Keqiang is reportedly planning to visit to Macau in October for a conference of ministers from China and Portuguese-speaking countries.