As the presidential election draws near, gaming analysts are suggesting that the outcome may provide divergent scenarios for Macau’s troubled gaming market, which has experienced a slow recovery from the coronavirus pandemic.
Edward Engel, a gaming analyst for Macquarie Securities whom is based n Hong Kong, outlined that the race between President Donald Trump and former Vice President Joe Biden may relieve reservations for the yet-to-be-understood re licensing process for gaming concessions. Such are due to expire in 2022.
The Current U.S.-China trade conflicts have severely affected Macau`s visitation and gaming numbers. Whilst the COVID-19 pandemic has further strained such a resource.
In August, Wynn Resorts, in a filing with both the Hong Kong Stock Exchange and the U.S. Securities and Exchange Commission, advised immensely that tensions between the U.S. and China have not diminished but have continued to escalate in 2020, leading to “contentious punitive or retaliatory measures being imposed on businesses and individuals.”This discussion, led to a first time in recent history that a U.S.-based gaming company has openly and willingly discussed the pressures between the two nations.
companies such as the Las Vegas Sands, MGM Resorts International and Wynn currently operate casinos in Macau and is highly considered to be the largest gaming market when it comes to revenue streams before the pandemic hit
After the initial 10 months of 2020, gaming revenues generated through Macau gaming are down 81.4% compared to 2019, when casinos there generated a total of $36.6 billion. Engel continued to outline that the dismantling of the “Trump overhang” would most probably enhance investor sentiment toward Macau, he stated; “particularly for this beaten-down sector where an array of negatives are priced in.”
Engel further mentioned that Macau stocks increased by more than 30% in the 2019 fourth quarter as U.S.-China tensions eased. On the other hand, he added that “Alternatively, a Trump re-election would likely continue weighing on Macau sentiment”.
Such an election outcome could also determine weather the Macau government is to provide clarity for its 2022 concession re licensing process. Concessions – the term used in Macau for the license to operate a casino – expire in June 2022 for the three U.S. companies, as well as Melco, Galaxy Entertainment, and SJM.
The gaming analyst further explained that a combination of a Biden election victory and a postponement of the 2022 concession renewals may relieve several Macau overhangs and improve risk opinion for the stocks. Furthermore, Engel also determined that Mr Sheldon Adelson, the CEO and Chairman of the Las Vegas Sands, who is also the majority owner of the company is in favor or the Republican Party and has a close relation.
Mr and Mrs Adelson are widely seen to be large donors to the candidates forming the Republican party. It is reported that the Adelsons donated $75 million to a super PAC supporting Trump’s re-election.
Concluding, Engle wrote
With Biden maintaining a wide lead in the polls, some U.S. equities have started pricing a Biden victory, particularly new energy stocks. Whilst “Macau stocks, alternatively, continue to slide as investors factor a slow recovery, coupled with risks of a second COVID wave in China and worsening U.S.-China relations.”
Source: CDC Gaming Reports
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