Macau Casino Stocks Extend Slide on Regulatory Fears, JPMorgan Downgrades All Six Operators

Macau gambling casino stocks are sliding for a arcsecond day, as officials inward the special administrative part (SAR) appear to read a more active regulatory role inwards the gaming industry.

News of the tighter regulatory grasp is contagious the hexad concessionaires and investors by surprise. Already grappling with a slower-than-expected recovery from the coronavirus pandemic and a murky time dividing line for license renewals — all gaming permits expire in June 2022 — Macau operators must now contend with the specter of the local governing potentially taking a more roughshod role inwards casino operations, increased governing equity ownership and mandates on how operators expend capital, including possible restrictions on dividends.

While it’s unclear how stringently the regime would moderate their [operators’] capital, we trust the hefty dividends of pre-Covid days would potential have scrutinized, if non restricted, inward grow making the story of ‘attractive discharge hard currency flows’ — which was the reason why we liked the sector — far to a lesser extent compelling, in our view,” said JPMorgan inward a observe to clients today.

The camber downgraded all 6 Macau concessionaires to “neutral” or “sell” ratings with the SAR’s US-based operators, to wit the China units of Las Vegas Sands (NYSE:LVS) and Wynn Resorts (NASDAQ:WYNN) bearing the brunt of the punishment.

Speaking of Punishment for Macau Stocks…

In Wednesday’s Asian session, Macau gaming equities plunged, as regulatory fears prompted investors to take off the names.

The sise concessionaires bled a combined $18.4 1000000000 inward market capitalization, with Sands Cathay – the largest operator inward the SAR – accounting for more than $8 one thousand million of that total. Sands People's Republic of China and Wynn Macau each missed nigh a thirdly of their marketplace value today. The Macau social unit of Wynn Resorts is at present on its mop up two-day streak since the bulge out of the coronavirus pandemic.

Speculation nearly Macau exerting more hold in o'er casinos — an industry that drives 55.5 percent of the local thriftiness — comes as global investors are already fleeing Chinese stocks due to a broader regulatory clampdown that creates to a greater extent of the uncertainty that marketplace participants disdain.

“We cogitate this annunciation would get already planted a seed of dubiety inward investors’ minds, which is belike plenty to de-rate these names until lucidness emerges on key points,” said the JPMorgan analysts.

The selling force per unit area is carrying o'er to US trading, as shares of LVS and MGM Resorts International (NYSE:MGM), majority possessor of MGM China, are to each one cancelled to a greater extent than iii percent, piece Wynn is sour 7.7 percent. Hong Kong-based Melco Resorts & Entertainment (NASDAQ:MLCO) is down feather nearly 18 percent on volume that’s rough three-bagger the daily average.

Other Concerns

Some market place observers are speculating that as Macau seeks to spay its gaming laws forward of the retendering process, certify continuance could be rock-bottom from the electric current term of 20 years. There’s also speak that government could seek to growth competition in the gaming industry.

Bernstein believes the operators currently in property aren’t sledding anywhere.

“Our survey remains that the half a dozen operators hither today testament be hither tomorrow,” said the research firm.

Regarding the possibility of dividend regulation, that talk of the town comes as US-based Macau operators ease aren’t paying, or are delivering substantially rock-bottom payouts. Authorities debate ensuring concessionaires are making investments inwards properties prior to delivering shareholder rewards, and that they get the financial potentiality to compensate dividends is a insurance that’s been in position for 2 decades — a full point inwards which Macau porcine gaming revenue (GGR) surged almost 22 times.