The bulls came charging at Macau casino stocks after international brokerage Morgan Stanley painted a rosy picture of the former Portuguese enclave’s gambling industry.
The Financial Times reported that Morgan Stanley’s 2018 outlook for Macau has stoked bullish sentiment among investors, pushing the shares of Macau casino companies up by more than 2 percent.
In its note on Tuesday, Morgan Stanley predicted that lower tier Chinese cities will provide the needed fuel for Macau’s casino market in the coming years as residents become more eager to travel.
Cities in China are classified based on their economic development, local gross domestic product, advanced transportation systems and infrastructure, as well as historical and cultural significance. Examples of ‘tier one’ cities are Beijing and Shanghai.
“Following a stronger than expected fourth quarter, we have become increasingly confident in Macau’s ability to capitalize on the increasing penetration from lower tier Chinese cities, and see visitation from lower tier cities increasing at a 10 percent [compound annual growth rate] over the next five years and total visitation growing at a 7 percent CAGR,” Morgan Stanley analyst Thomas Allen said, according to the news outlet.
Data from the Macau Government Tourism Office showed that visitors from the so-called “Greater China markets” rose by 5.3 percent to 29.4 million in 2017, while tourists from mainland China alone grew 8.5 percent to over 20 million last year.
Morgan Stanley analysts believe that half of the 20 million Chinese visitor arrivals in Macau came from lower-tier cities.
To support the continued growth of visitors from lower tier Chinese cities, Morgan Stanley said that Macau should further improve its transportation infrastructure, increase hotel room supply, and growing outbound tourism from China.
The international brokerage noted the importance of the opening of the Hong Kong-Zuhai-Macau Bridge this year and the extension of Guangzhou-Zhuhai Intercity Rail to Hengqin in luring more visitors to Asia’s premier gambling hub.
