Macau casinos drop on visa tightening talk
HONG KONG (MarketWatch) –- Hong Kong-traded Macau casino shares fell sharply Tuesday amid concern that China may be considering tightening visa and credit policies, potentially triggering a rapid drop in tourist visits from the Chinese mainland.
The declines follow Monday brokerage research by Wells Fargo Securities. That note cited reports in the Chinese-language Macau Daily that visa issuance under the individual travel permit scheme, which enables mainland Chinese to travel to Macau on their own, could be tightened.
The Wells Fargo note also highlights concern that credit limits affecting China UnionPay credit cards, a type of credit card that tourists from China commonly use, could be reduced.
"We would expect stocks to react negatively to these two policy initiatives," Wells
Decline and partial recoup
Fargo analysts headed by Cameron McKnight wrote in the note.
Casino shares indeed reacted negatively to the report on Tuesday, though losses were pared late in the trading day in some instances.
Visits down, revenue hurt
Meanwhile, Well Fargo's McKnight said visa restrictions by mainland authorities were a factor behind declining Chinese-tourist visits in 2008-2009, which hurt casino revenue meaningfully during the period.
Lack of transparency in China's visa policy was also a negative as investors tried to look ahead and raised questions about whether a rapid rise in Macau gambling revenue was drawing to a close as the mainland economy began to cool, he said
McKnight indicated that lower limits on China UnionPay cards would meaningfully crimp gambling activities among high rollers and mass-market players alike.
He added that it wasn't clear from the Chinese press reports "whether tighter policies have already or will soon be implemented, or whether proposals are simply being mooted," McKnight said.
"If 2008-2009 is any guide, investors, analysts and potentially the gaming concessionaires themselves are likely the last to know if in fact a visa- policy change has occurred," the analyst wrote.
The individual travel permits scheme accounts for 25% of all tourist visits to Macau and about 41% of mainland tourist visits, according to Wells Fargo.
McKnight said he maintained the view expressed in December around the theme of "growth slowing, risks increasing," and reiterated that he was cautious on Macau gambling stocks this year.