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Macau VIP vs China credit.

  • In past notes we’ve discussed the statistically significant relationship between VIP Rolling Chip (RC) Volume in Macau and China’s reserve ratio requirement and discount rate which we found peaked on an 8-9 month lag.  With little change in China’s monetary policy since Q2 2012 or 2013 (loosened), the softer Macau gaming revenues cannot be blamed on the China Fed.
  • Here we’ve plotted and regressed VIP Rolling Chip volume against China Yuan loan growth.  The correlation and significance peaks at a 1 month lag (0.37 and T-stat of 2.9).
  • Could the YoY decline in loans in March explain some of the weakness in RC thus far in April?
  • Probably but minor.  The March/April multi year comparisons are more difficult than March/May.  We’re projecting 20% YoY Macau total GGR growth in May.
  • Sentiment has turned decidedly negative with VIP and credit fears running rampant. While we predicted a disappointing March/April, we’re not sure fundamentals have changed much.  Look for a May rebound to catalyze the downtrodden Macau stocks.

THE MACAU CORRELATIONS - China Yuan Growth v Macau VIP RC 4 16 2014 7 52 22 AM