Inside Asian Gaming

INSIDE ASIAN GAMING | January 2009 18 Market Outlook C hina’s manufacturing sector is on the brink of technical recession, according to an influential monthly report produced by CLSA, a provider of brokerage and investment services. Deutsche Bank was already predicting a 14% contraction in Macau’s gaming revenue for 2009, but that forecast was based on a more bullish assessment by its regional economist that the Chinese economy would keep growing, but at a slower rate. An actual technical recession is likely to have gaming analysts reaching for their calculators to make a fresh and possibly gloomier assessment of Macau’s prospects for 2009. The reason for special concern about the CLSA report is that Macau’s gaming industry is heavily dependent on VIP players (they account for around 70% of all revenues). Many of these VIP players are owners or investors in the manufacturing sector now reportedly threatened not just with a much-heralded downturn but a full- blooded recession. Down and down CLSA’s snapshot of local business conditions is based on a survey of the intentions of manufacturing purchasingmanagers, and known as the PMI. “With five back-to-back PMIs signalling contraction, the manufacturing sector, which accounts for 43% of the Chinese economy, is close to technical recession,” said Eric Fishwick, CLSA’s chief economist, after the latest index was published on 2nd January. Another PMI issued two days later on 4th January by a Beijing-sanctioned body, the China Federation of Logistics & Purchasing, rose slightly to 41.2 for December, compared with 38.8 in November. The trend, however, is still recession- bound. A PMI reading above 50.0 indicates manufacturing growth, and a reading below 50 indicates decline. Both the CLSA index and the CFLP gauge stayed below 50 in the fourth quarter of last year. China’s share market indices reportedly ended the year down 65% on average, adding further gloom to the regional economic picture. Rolling Downhill It will be hard to improve on the 2008 performance of Macau’s high-roller segment during 2009 It ill r t i r t rf r f ’s i -r ll r s t ri