Morgan Stanley forecast: gambling sales in Macau corrected downwards

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Peter Brandt 2. October 2019

Last week, the US Bankhaus Morgan Stanley published its latest forecasts regarding sales for the MacAUS gambling market. In his report, investment bank Morgan Stanley significantly corrected the expected sales figures downwards. For the player paradise in 2020, instead of an increase in sales of eight percent, you only expect an increase of three percent. The current financial year is also less positive than expected. The trade war between the People’s Republic of China and the United States also has its influence on development.

According to a forecast by the US bank house Morgan Stanley, the gaming market in Macau has to expect a decline in sales. ((© image source)

License extensions are on the brink through trade war

In the latest forecast report for the sales of the casinos in Macau, the US Bank House Morgan Stanley corrects The forecast growth figures significantly down. The lower figures lie primarily in the sunken expectations for the VIP players’ market as well as through low-failing sales figures in mass tourism. In addition, there is another important factor – the current trade war between the United States of America and the People’s Republic of China.

Between the fronts in the trade war – the importance of Macaus: Macau is a Chinese enclave and known all over the world as a gigantic player paradise. Stable economic conditions are of direct importance for continued successful growth. However, these are not only necessary regionally. Rather, Macau depends on the international investments of American gambling companies such as Wynn Macau, MGM China and Sands China. At the time of returning Macaus to China, these companies had received valid lucky playing licenses in 1999 to 2023. Although these should be extended in 2018, the smoldering trade war between the United States and China complicates the negotiations massively. China tries to hold the lucky gambling licenses as a means of pressure against US President Donald Trump as a trump card in his hand, since he also holds important connections to the industry as a former casino entrepreneur. Among other things, the Casino Tycoon Sheldon Adelson appeared as a campaign sponsor for the US president.

Bad numbers also in the current financial year

But not only the forecasts for gambling sales in Macau in 2020 are significantly worse than expected. Morgan Stanley also corrected the numbers of the current financial year. A few months ago, the bank had expected negative growth in the sales figures of the casinos of minus one percent. Now be already a decline of three percent targeted. The corrected predictions for the two months of November and December were decisive for the corrected forecast. Praveen Choudhary and Thomas Allen explain the background in the report as follows:

“Despite our expectation of a four percent GGR growth [a growth of gross happiness. The editors’ note] For September (…) we expect a negative GGR growth in November/December. Many macroeconomic indicators indicate a recovery of the VIP markets by December, but VIP revenue has deteriorated in the past three months. An even bigger problem is mass sales, which has remained robust (more than 10 percent [growth] compared to the previous year in the first eight months), but could slow down in the fourth quarter of 2019 and reach single -digit numbers. ”

Especially the strongly sunken sales of the casinos among the so-called VIP players are for losses compared to 2018 in the amount of 17 percent responsible. Likewise, some delayed new openings of different hotel complexes have a negative impact on the mass business. As a result, growth in the area of new hotel room fell from 6.1 percent in July in 2018 to 0.8 percent in July 2019.

Low gross domestic product part of a troubling trend

Also apart from the world -famous gambling market in Macau, current figures give reason to worry. After the negative forecast from the Morgan Stanley bank house, a macroeconomic forecast of the Institute for Economic Affairs and Macau studies at the University of Macau for the 2019-2020 period followed just a few days later. This report also looks ahead. According to the forecast, the gross domestic product will be compared to the end of 2019 compared to the previous year by 0.8 percent lower. the trend is likely to continue next year, which means a higher minus of the gross domestic product of 0.9 percent. according to the scientists, the reasons for the decline are in Slapping goods exports and stalling growth in consumption and investment sector justified. In addition, the falling service ex-and imports would be added in the near future, which further worsen the situation in Macau. To the smoldering trade war And the tension between the USA and the realm of the middle is of great importance. On the other hand, the negative trend could also be stopped by solving economic differences from the two major powers. The world and especially the enclave Macau will continue to pursue developments with great interest.