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Macau GDP Weakens in Q3; Visa Restrictions to be Lifted? (LVS)

Posted on | December 1, 2008 Time: 10:41 am |

The Statistics and Census Service (DSEC) today released 3rd quarter GDP for the Macau Special Administrative Region of China. Growth slowed sharply, coming in at just 11.3% for the 3rd quarter, after posting gains of 32% and 22% in the first two quarters, respectively.

Gross Casino Revenue grew 27.6% after registering 47.6% in the 2nd quarter. Total visitor spending ex-gaming rose just 4%, and construction & infrastructure spending fell off a cliff, down over 25%.

Prospects for Las Vegas Sands, Wynn

Anecdotal evidence from Steve Wynn and Sheldon Adelson point to improvement in visitor traffic and gaming revenues in October, but the increase in visa restrictions has certainly had a halting effect on growth of the Macau region. The Chinese government, while initially mindful of keeping the region from growing too quickly, now is faced with Macau entering a steep recession. Given the bang for the buck in terms of building goodwill with its citizens, China could ease the visa restrictions and help support Macau’s local economy, which doesn’t have enough of a base to withstand a prolonged economic downturn.

If we were to get any growth-promoting change in the visa policy, look for a relative boost to Las Vegas Sands (LVS) and Wynn Resorts (WYNN) share, with LVS by far the most leveraged to a policy shift.

{Prior Reading on LVS: Sustainable Through 2009?}

Disclosure: Author does not hold positions in companies mentioned.

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Category: China, Gaming/Casinos
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