International credit debt watcher Fitch Ratings Inc. predicts a long recovery for Macau after finally hitting rock bottom.
Fitch Ratings made the forecast after Macau announces that its gross gaming revenue in November picked up at MOP18.79 billion (US$2.35) billion or 14.4 percent higher compared to the same period last year.
Alex Bumazhny, Senior Director, U.S. Corporates of Fitch Ratings, said that Macau’s economy is steadily recovering from its slump, albeit at a slower pace. The agency sees Macau’s gaming revenues to slide 4 per cent in 2016 before rebounding to mid-single-digit growth in 2017
“Macau gaming, now firmly at the bottom of the cycle, has better long-term prospects given investments in new supply, improvements in mass market indicators and under-penetration of gaming throughout the rest of Asia,” Bumazhny said in a statement. “That assumes the revenue improvements seen recently stick and then increase slightly when the MGM Cotai opens.”
Speaking of newly opened casino resorts, Fitch said that it doesn’t see any signs of cannibalization among the old and newer gaming facilities.
“The mass-market segment appears to be responding well to new supply so far, with year-on-year gaming revenue for this segment increasing 4 per cent in third-quarter 2016,” the release notes, “Macau operators’ commentary on their long beleaguered VIP segments started to turn positive this fall.”
Fitch, however, noted several headwinds that Macau faces, including extensive competition in the Asia-Pacific region – except for Singapore, which will see its gross gaming revenues stall on weakness in its VIP segment.
“With Macau on an upswing, China’s economic slowdown appears to be benign to tourism throughout [the Asia Pacific], spurring casino developments in South Korea, Vietnam, and the Philippines,” notes Vicky Melbourne, Senior Director, Head of APAC Industrials. “This will lead to increased competition among [Asia Pacific]’s regional markets as new integrated resorts come online.”
In addition, the group comments that the prospects for the legalization of Japan’s gaming market remain unknown as ‘social concerns like problem gambling and organized crime present hurdles’.
‘However, if casino gaming becomes legal, Japan would likely have the largest gaming market in APAC outside of Macau,’ the firm notes in the release.
