The Chinese economy is turning green. It is registering general improvements, in spite of the ongoing U.S.-China trade war, and this is helping Macau’s positing in the gambling industry. As a result, the brokerage arm of Nomura, Instinet, has updated its position on the city’s gross gaming revenue (GGR) forecast for this year, and now expects Macau to see anywhere between 1-4% positive growth. Instinet had previously predicted a 3% contraction of GGR in the city.
In a note this past Wednesday from Instinet’s analysts, Harry Curtis, Daniel Adam and Brian Dobson, “Considering the fourth-quarter and year-to-date GGR, we believe that 2019 growth will settle in a range of 1 percent to 4 percent. One percent is consensus, but 4 percent growth is possible if GGR volumes follow the recovery in key China economic indicators.”
The Chinese gambling market is one of the most important sources of high-roller gambling income for Macau, as well as the city’s main source of mass-market gaming revenue. The analysts pointed out that there are a number of signs that the economy in mainland China is improving, leading to the revised forecast.
When the U.S.-China trade war was in full swing last November, Instinet had predicted that Macau’s VIP market segment would see contractions of as much as 10% this year. This was expected to offset the annual growth of either 3% or 4% that was expected for the slot machine and mass gaming segments.
The analysts wrote in their latest note, “With green shoots now sprouting in China, VIP volumes could be flattish this year … If Beijing continues to foster credit and liquidity growth through 2019, then GGR growth could approach mid-single digits. The governing factor might be additional regulatory efforts at controlling currency flight, but, so far, players seem to find creative ways to access capital.”
Instinet also predicts that that GGR for the mass market gaming segment could increase by around 7% this year, an improvement over the 4% the brokerage had previously indicated. It also stated that there could be an increase of around 1% in VIP gaming revenue.
During the first two months of 2019, the GGR in Macau slipped compared to the same period last year. It dropped an average of 0.5% over the two months, beginning with a 5% year-on-year decline in January and ending with a 4.4% increase in February.
