The ups and downs of gambling in Macau

There is a rollercoaster ride taking place in China’s former Portuguese colony Macau, where economic schizophrenia appears to reign supreme. On the one hand, the Covid-19 pandemic has kicked Macau’s sole engine of economic growth – casinos – squarely in the nuts, causing GDP to drop by almost half from 2019 levels. Gross gaming income in China’s only legal territory fell from $36bn in 2019 to $7.5bn in 2020. And yet, on the other hand, investors seem to see no reason to shy away, as the share prices of Macau’s six casino operators have appeared resistant to viral infection. The largest, Galaxy Entertainment, saw its market value expand to $42bn, despite reporting a drop in annual revenues of around 75%. The question is, how much of a reckless punt are the investors taking? Visitors to Macau from the Chinese mainland, who account for 70% of all non-resident gamblers, have been exempted from all quarantine regulations since February, and Macau is the only place with which China has an open and two-way travel bubble. This is a unique and un precedented asset for the casino sector, and it seems clear that investors are happy to gamble on the fact the Chinese love to gamble, and previous levels of demand will soon return.