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.