Macau casino shares rally after gaming law offers reprieve to US companies

Macau casino stocks shot higher after officials said they would maintain the number of licences available to gaming operators in the territory, ending years of uncertainty for US companies in the Asian gambling hub.

The shares of US casino operators, which investors had feared could lose out if the number of licensees was reduced, were among the biggest gainers in Asian markets on Monday, with Sands China jumping 14.6 per cent, MGM China rising 11 per cent and Wynn Macau up 9 per cent.

On Friday, officials revealed that as part of the territory’s revised gaming law, authorities would offer six casino licences for up to 13 years by public tender when the previous 20-year licences expire in June.

With six large casinos already operating in Macau, analysts expect all of the city’s dominant players to retain their presence in the only Chinese city where casino gambling is legal.

Macau also did not raise its gaming tax as feared, introduce a licensing fee or station a government observer inside big casinos with the capacity to attend board meetings, a relief to beleaguered operators in the territory.

George Choi, an analyst with Citi, said the announcement “should remove most investors’ key concerns” about the revised gaming law, calling the clarity from officials was “the important positive catalyst that we are looking for.”

Among other changes, the revised law will require executive directors who are Macau permanent residents to hold at least 15 per cent of the share capital of the licence holder, up from 10 per cent. But analysts said this was unlikely to directly impact Hong Kong-listed stocks of operators.

“We were surprised the government’s stance on some contentious topics has become far less onerous, if not surprisingly accommodative,” analysts at JPMorgan wrote in a note following the announcement. “We think this should help normalise multiples to some extent and make this space — finally — investable for a wider swath of investors.”

The law, introduced by the Chinese government, has dragged significantly on the shares of casino operators, compounding a severe downturn caused by the Covid-19 pandemic.

Even after Monday’s rally, a Bloomberg index tracking the six big Macau casino operators listed in Hong Kong was down about 50 per cent since the end of 2019.

“This new draft law provides some clarity in the short term, however it does not necessarily mean we will return to the [industry’s] heyday,” said Ben Lee, an Asian gaming expert and managing partner at Macau-based IGamiX Management and Consulting.

Cheong Weng Chon, Macau’s secretary for administration and justice, said during the law’s announcements on Friday that a limit of six licences was decided after factoring in the city’s economy and a “suitable scale of development” for the gaming industry.

Lee said that “leads one to wonder if they are implying that the gaming revenue we have seen over the past two years is more or less what we will be permitted to have”.

Additional reporting by Jennifer Creery in Hong Kong