Macau to see mass market-led recovery: Fitch


Fitch Ratings Inc says the rating and outlook for Macau's gaming sector in 2016 remain stable, as casino revenues are expected to stabilise next year.

The ratings house expects Macau's gaming revenues to post a full-year 2015 decline of about 34 percent to 35 percent, "but moderate in 2016 with revenue declines of approximately 5 percent".

"China's investment-led economic slowdown should not have a significant impact, with fundamentals indicating consumer spending growth will remain intact," Fitch said in its 2016 outlook for the Macau gaming sector.

The ratings agency said it believes Macau's gaming growth prospects "will remain dependent on travel policies and infrastructure, available credit for the VIP segment, perceptions about the mainland's corruption crackdown, and domestic policies like the smoking ban".

Macau's accumulated casino gross gaming revenue (GGR) for the first 11 months of 2015 stands at MOP212.5 billion (US$26.6 billion), a fall of 35.3percent compared to the same period in 2014, according to official data.

"Investors in Macau's gaming sector are playing the long game," Alex Bumazhny, Fitch's director of gaming, lodging and leisure, said in the report. "As Macau's gaming revenues begin to stabilise next year, we're starting to see its long-term potential on the horizon," he added.

Fitch additionally said it believes the Asia Pacific gaming market "remains underpenetrated", adding that the city's "delayed infrastructure projects, once completed, will make Macau more accessible to the mass market".

The ratings house was referring to public infrastructure projects that have been trailed by some investors as being beneficial to the growth of Macau mass market gambling.

A bridge connecting Hong Kong, Zhuhai and Macau across the Pearl River Delta will miss its 2016 deadline for completion by one year, the Hong Kong government confirmed in a statement last month.

Investment analysts have said that delays to public infrastructure projects in Macau could be a concern once most of the new Cotai casino properties are operational in 2016. The new Cotai resorts are opening on various dates between 2015 and 2017.

"New projects in the Cotai area of Macau could underperform initially but should show more acceptable returns in two to three years," said Fitch.

The ratings house expects Macau's economy to shrink by 16 percent year-on-year in real terms in 2015, highlighting "the risks to Macau's economy from its heavy reliance on gaming revenues from Chinese visitors, and its vulnerability to shifts in mainland government policy".


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