Macau is benefiting from a mini-boom in China’s premium segment on the back of liquidity growth and improving corporate economics, according to a report from brokerage Sanford C Bernstein.
Identifying the recent upward push in VIP Gaming revenues in Macau – a trend also reflected in the sales of premium cars on the mainland – the report predicts that strength in high end production will continue through much of 2017 with the likes of Wynn, Melco and Galaxy to benefit most from the VIP surge.
“With Total Social Financing (TSF) rising as much as 16.4 percent in 2016 and money supply also growing solidly … it seems uncontroversial to suggest the abundance of money in China has contributed to resurgent consumer confidence and high-end discretionary spending,” it says.
“Improving housing prices are in part a product of the boom in liquidity, but likely also help to reinforce high-end demand – given the feedback loop of wealth effects.”
The report suggests that corporate economics favor premium over mass for the time being and while monetary tightening in China remains a concern, it is unlikely to impact in the short term.
“In Macau gaming, we expect Wynn Macau, Galaxy, and MPEL (mostly from VIP growth at Studio City) to benefit most from the strength in VIP. Our expectations for the longer term diverge somewhat, [and] our views on long term VIP growth in Macau are somewhat tempered. We forecast ~3 percent VIP GGR CAGR through the end of the decade.”
