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Takeaway: Looking for a positive pivot to our year long short thesis but with numbers and sentiment heading south, we're definitely not there yet

Explaining the big move lower in the HK listed Macau stocks


The HKSE-listed Macau gaming operator stocks were down big in HKSE trading today, possibly for a variety reasons. We're not sure how well circulated among the investment community, but we've just learned of a government immigration sweep taking place earlier this week in Macau. We remain negative overall on the stocks at least until Q4 and 2015 estimates are reduced dramatically.

the big move

While the Hang Seng Index fell almost 1% today, the HKSE-listed Macau gaming operators were down significantly more:

  • Wynn Macau (1128.HK) -6%
  • SJM (0880.HK) -6%
  • Macau Legend (1680.HK) -6%
  • Sands China (1928.HK) -5%
  • Galaxy (0027.HK) -5%
  • Louis XIII (0577.HK) -4%
  • Melco-Crown (6683.HK) -3%
  • MGM China (2282.HK) -2%

Immigration sweep

While there may have been multiple reasons for such a large move downward, we're most concerned with news of the immigration sweep. We haven't seen any news articles - we heard about it this am from a contact in Macau last night - so we're not sure how much it contributed to the stock move.  

Apparently, mainland Chinese immigration officials conducted an immigration sweep through Macau casinos, bars, and restaurants a few nights ago and took several thousand Chinese visitors into custody for overstaying their transit visas. These detainees where then relocated back into Mainland China.

Combined with yesterday's news of the new Transit Visa scheme, the sweep indicates that Macau/China are serious about the cleaning up Macau before the China President's visit in a few weeks.  VIPs are likely to stay away this month which could dampen GGR even more than the 20-25% YoY decline we're forecasting.


Aside from the overall drop in the Hang Seng and the immigration sweep, other factors likely impacted the HK Macau stocks overnight:

  • An Australia-based investment bank re-initiated coverage of the Macau gaming sector after the close of the HKSE on Tuesday evening, Tuesday morning New York time, with a downgrade of the sector and several operators including Sand China to underperform.
  • Yesterday morning New York time and after the close of the HKSE, we learned of additional Mainland China initiated travel crackdowns on Mainland Chinese attempting to visit Macau on 5-day transit visas - and how Mainland Chinese were being turned back on the China side when attempting to exit China with non-matching travel documents.
  • The release of the GGR detail, while in line with recently reduced expectations in the aggregate, revealed worse than expected Mass revenues and likely lower VIP volumes than expected.


And the hits just keep coming. US listed Macau stocks should be heading lower this morning and over the near-term. We're looking for a positive pivot to our almost year long short thesis but with numbers and sentiment heading south, we're definitely not there yet.