Casinos are winning big on Chinese stimulus

Stay informed with free updates

Simply sign up to the Chinese business & finance myFT Digest — delivered directly to your inbox.

Casino spending offers one of the more trustable Chinese real-time economic indicators. Visitor numbers from Hong Kong and the mainland to Macau, the world’s largest gambling hub, give a sense of consumer confidence. Chinese GDP tracks fairly well against gross gaming revenue from slot-machine punters, while trends in property markets and luxury goods correlate reasonably with how much high-rollers on junkets are wagering.

It’s not a clean indicator, however. The effects of Covid lockdowns have held back visitor rates more than in Singapore and Las Vegas, while anti-corruption measures introduced in 2014 made casinos more reliant on public holidays, the most important of which is National Day Golden Week.

This year’s Golden Week is an even bigger deal than usual, having begun five days after China launched its bazooka stimulus package. And, according to the early readings, Macau gambling revenues have been blowing the roof off.

Analysts estimate gross gaming revenue for the first six days of October at 6.5bn Macanese pataca ($810mn), up 30 per cent year-on-year. Gross gaming revenue figures shown below are from the Macau Gaming Inspection and Coordination Bureau, with the data compiled by Citigroup:

The print implies that month-to-date mass-market gross gaming revenue has recovered to 130-140 per cent of pre-Covid levels, says JPMorgan. Macau visitor numbers are about 105 per cent of 2019 levels so gambling spending per capita looks to have jumped by about 25 per cent, the broker tells clients.

VIP gambling trends are tracking at about 30-35 of pre-Covid levels and are much trickier to read, the market having been in structural decline for years. Competition and tighter restrictions on money exchange have closed many of Macau’s junket rooms, so “VIP” mostly just refers to anyone playing baccarat, which the industry splits between “premium mass” and “grind mass” based on the size of the minimum wager.

According to JPMorgan, quite a few premium-mass players would have delayed their September visit to Macau to catch a maiden appearance by Hong Kong A-lister Andy Lau, who was at Galaxy Resort between October 3 and 6. (Low-stakes players are considered less likely to go to shows because they’re probably on day-return tickets, or have accommodation booked on the cheaper side of Lótus Bridge and the Hengqin border line.)

Potentially more significant is a return of the real high rollers, Citi says. For one day in Golden Week it counted 62 punters betting HK$100,000 or more ($129,000), which is nearly double its 2023 count.

“The amount of premium mass wager we observed in our National Day Golden Week table survey is record-breaking,” says the broker. “The [number] of premium mass players and whales we ran into were also record highs.”

The Player of the Month showed up at Galaxy Macau’s Horizon room with an HK$420,000 bet. He was one of the 15 whales we ran into at Galaxy Macau that day. We saw five whales betting HK$1.1 million in aggregate on one hand at the Chairman Club of Wynn Palace (overall we saw 12 whales at Wynn Palace). Nine whales betting HK$100k-400k were seen at City of Dreams’ High Limit area and the Signature Club. Five whales betting HK$100k-400k were seen at Sands’ Apex room at Plaza.

This tracks. China’s stimulus package increased the combined wealth of 54 Chinese billionaires by nearly $130bn in the week ended September 30, according to Bloomberg data. Chinese Fuerdai and Tuhao will be feeling similarly flush.

What the jump in average spend says about mass-market consumer sentiment is much less clear. Macau gross gaming revenue typically drops after Golden Week, with this year unlikely to break the pattern. A resort concert playbill for the rest of October that features Charlie Puth, (G)I-DLE and Plácido Domingo might not have pulling power equivalent to Andy Lau.

Yet Hong Kong-listed casino owners Galaxy Entertainment, Wynn Macau, MGM China and Sands China closed overnight at or near their year-to-date highs, having jumped as much as 50 per cent in the past few sessions. The sector gains mirror the euphoria and short covering that have powered wider Chinese equity markets, so raise similar questions about sustainability.

Per Abrdn data, Chinese domestic investors account for 86 per cent of A-share trading volumes and 35 per cent for Hong Kong listings. A feedback loop develops between the strength of Chinese stocks and the desire for Chinese to gamble by other means. A blowout week for the Macau casinos shows if nothing else how much of the recent wealth creation is easy come, easy go.

Further reading:
— Fade the Chinese market euphoria? (FTAV)
— Could the balloon shooting have taken the gas out of Chinese stocks? (FTAV)
— FT.com/China