Gary Pinge (Senior VP, Gaming Research, Macquarie Securities HK) looks at the impact of recent policy decisions in China, Macau and Singapore on the Macau gaming sector
While it is early in 2010, there are a number of events and policy statements that we believe paint the outlook for Macau in 2010. The key policies we are focusing on include:
- • The PRC government’s desire to cool property prices, which have risen 26% in the last 18 months.
- • China’s monetary policy, which has a greater bias towards monetary tightening (mainly due to the desire to cool bank lending for property purchases).
- • Comments by Macau’s new incoming chief executive, Fernando Chui, with regard to the diversification of the economy.
- • Singaporean junket regulations, which make the registration of junkets challenging.
Of the above four policy objectives, the one that has received the most air time and rocked the markets relates to recent decisions to pull back the rampant credit growth in China and tighten monetary policy so as to cool the property market in China.
At the risk of oversimplification, these policy moves have been one of the main drivers of the weakness in the Hong Kong/Chinese stock markets, as Chinese monetary policy has been a driver of asset price (mainly property) inflation in China, which in turn has built consumer sentiment and the wealth effect in China.
We believe the policies have a number of implications for the sector. The key ones include:
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