MACAU: THE SSE MATTERS

Takeaway: Maybe less so over the near-term, but the performance of the China stock market impacts Macau gaming revenues.

Our statistical analysis has found that Mass gaming revenues and VIP volumes lag the Shanghai Stock Index (SSE) by 4 and 3 months, respectively.  That is, the YoY change in Chinese stocks is a statistically significant driver of the YoY change in Macau gaming revenues (GGR), albeit on a lag.  The upshot here is that while we still believe we are above consensus expectations for the rest of the year, based on the recent performance of the SSE, there could be 1-3% downside to our monthly YoY GGR projections. 

 

MACAU: THE SSE MATTERS - SSE1  

 

We’ve seen and authored studies in the past that showed no correlation between the Shanghai Composite and Macau gaming revenues (GGR).  An astute client of ours recently suggested that Macau could follow the same pattern as a number of US-based industrial companies that saw their China business lag the Chinese stock market.  The theory is that the SSE is a discounting mechanism that leads China's economy up or down which in turn contributes to or detracts from gaming revenues in Macau.

 

The good news is that July was such a poor month and the stocks have already taken a beating.  Moreover, when we plug the SSE impact into our model, it only reduces YoY growth by 1-3% depending on the month, as can be seen in the chart below.  However, we would be concerned if the SSE continues to fall.  Our near-term outlook (Trade) for Macau stocks is favorable, particularly LVS, but if the SSE falls further, that would bring some uncertainty into the intermediate or Trend call.  Our long term (Tail) view remains positive.

 

MACAU: THE SSE MATTERS - sse2


Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more