Hong Kong Casino Stocks Fall on Weak Macau Gaming Revenue

Hong Kong-listed casino stocks fell on Friday after Macau's gaming revenue missed expectations, with investors concerned about the outlook for the world's largest gambling hub. The Macau Gaming Inspection and Coordination Bureau reported that gross gaming revenue (GGR) in January 2025 was 18.25 billion patacas (US$2.27 billion), a drop of 5.6 percent compared to 2024's 19.34 billion patacas (US$2.39 billion). This was lower than the 6 percent year-on-year rise forecast by Citigroup analysts.

The decline in gaming revenue comes after a strong performance in October 2023, when revenue jumped 6.6 percent year-on-year, boosted by concerts of Hong Kong and Korean pop stars in the final week of the month. However, the recent downturn in earnings can be attributed to the 25th anniversary of the Macao SAR, including the Chinese President's visit to Macao, which analysts believe had a negative impact on earnings.

Macau's gaming industry recorded a GGR of 18.2 billion patacas (US$2.25 billion) in December 2024, a drop of 1.3 percent month-on-month or a decline of 2 percent year-on-year. Despite the downturn, the city's visitor arrival numbers gained a boost from the introduction of new multiple-entry visas for Zhuhai and Hengqin residents on 1 January. For this year, the SAR government expects the casino operators to generate an annual GGR of 240 billion patacas (US$29.7 billion), marking a rise of almost 6 percent against the GGR of 226.8 billion patacas registered in 2024.



However, not all analysts share the government's GGR estimates. CreditSights analysts project a 2025 GGR of 245 billion patacas, exceeding the government's predictions. The GGR decrease is surprising given that January is a major holiday period that has traditionally seen an influx of visitors traveling to Macao for the New Year and Spring Festival celebrations. The city's visitor arrival numbers also gained a boost from the introduction of new multiple-entry visas for Zhuhai and Hengqin residents on 1 January.

Hong Kong-listed casino stocks fell on Friday, with Melco International ending 6.9 percent higher, Galaxy Entertainment up 5.9 percent, MGM China up 5.7 percent, Wynn Macau up 4.1 percent, and Sands China up 4.2 percent. The decline in gaming revenue has raised concerns about the outlook for Macau's casino industry, as investors worry about the impact of regulatory headwinds and slower growth on Hong Kong-listed casino stocks.

The Chinese government's regulatory stance on Macau's gaming industry has the potential to significantly impact the region's casino stocks, including those listed in Hong Kong. The Chinese government has been cracking down on capital outflow and money laundering, which are prevalent in Macau's gaming industry. In October 2023, Macau's legislature passed a gambling crimes bill that criminalized unlicensed money exchanges, a widespread practice around casinos. This regulatory move could lead to increased scrutiny and potential fines for casino operators, affecting their bottom lines and stock prices.

Additionally, the Chinese government has been encouraging Macau to diversify its economy away from casinos. In October 2023, Macau elected former judge Sam Hou Fai as its new leader, who had previously warned against the gambling industry's outsize influence. This signals a toughening approach for the city to diversify away from casinos, which could lead to slower growth or stagnant profit growth for Macau's gaming industry and, by extension, Hong Kong-listed casino stocks.

In conclusion, the decline in Macau's gaming revenue has raised concerns about the outlook for the region's casino industry and Hong Kong-listed casino stocks. The Chinese government's regulatory stance on Macau's gaming industry has the potential to significantly impact these stocks, as investors worry about the impact of regulatory headwinds and slower growth. However, some analysts remain optimistic about the prospects for Macau's gaming industry and Hong Kong-listed casino stocks, as they believe that market participants have already priced in concerns about China's macroeconomic climate.