GGRAsia – China dodging 2020 GDP fall should perk Macau: Nomura

China dodging 2020 GDP fall should perk Macau: Nomura

Dec 27, 2019 Newsdesk Latest News, Macau, Top of the deck

Providing China’s gross domestic product (GDP) growth rate does not slow in 2020 to what some predict would be a 30-year low for the country’s economic expansion, it should “lift sentiment” for Chinese casino players frequenting Macau.

That is according to commentary by Nomura’s Instinet LLC brokerage, in a lookahead note issued just before the Christmas holiday, which is observed in Macau and Hong Kong, though not in China as a whole.

“The consensus estimate for 2020 GDP growth in China is +5.9 percent, but Nomura’s economists expect 6.1-percent GDP growth next year,” wrote analysts Harry Curtis, Daniel Adam and Brian Dobson.

Economists at UBS Wealth Management, a unit of Switzerland-based banking group UBS AG, had said in late November that China’s economic growth might next year drop below 6 percent – which would be the first such occurrence since 1990 – as the world’s second-largest economy continued to be affected by the United States-China trade war, and by a reduction in domestic infrastructure investment.

Fitch Ratings Inc said in a memo this week it expected Macau’s own GDP performance to be flat in 2020 due to a subdued gaming market.

But “if Nomura’s economists are right, and China GDP growth doesn’t decelerate next year, then we would expect a corresponding lift in player sentiment” in the Macau casino market, said Nomura’s analyst team covering Americas gaming and lodging.

Their brief includes the stocks of United States-based MGM Resorts International, parent of Macau casino firm MGM China Holdings Ltd, and Nasdaq-listed Melco Resorts and Entertainment Ltd, also a Macau licensee.

Market-wide in the Macau casino sector, Nomura’s outlook for 2020 gross gaming revenue (GGR) growth next year is a “range of +1 percent to +3 percent,” with tough comparisons to 2019 a factor in the first half of 2020, followed by “positive GGR growth in the second half, and double-digit mass [market gambling] growth for the year,” stated the Nomura team.

Potential Macau market 2020 catalysts included: the possible launch of a new spur link from the main portion of China’s high-speed railway network to the non-gaming tourism attractions of Hengqin Island, mainland China territory next door to Macau; the recently-opened Light Rapid Transit rail system linking Macau International Airport and the Pac On ferry terminal at Taipa to some of Cotai’s casino resorts; and possible “political détente between China and the U.S., and stabilising confidence in China,” said Nomura.