U.S. casino stocks and their Hong Kong-listed subsidiaries surged Monday after the Macau government renewed the licenses of the city’s six operators for another 10 years.
The approvals, which lift a key risk that has long loomed over the sector, sparked a strong rally in Hong Kong even as the broader Hang Seng index fell amid concerns over protests in China. Subsidiaries of
Las Vegas Sands
(MGM) were all renewed, as well as local players
(0880.Hong Kong) and
Melco Resorts & Entertainment
stock jumped close to 7% in premarket trading, while its subsidiary
closed more than 15% higher in Hong Kong trading.
Las Vegas Sands
stock pointed 3.5% higher ahead of the open as
closed 8.4% higher.
edged 2% up in premarket trading, while
rose 13%. Melco Resorts stock, listed in the U.S., was rising nearly 7% early Monday.
Casino stocks exposed to Macau have typically fallen, often more so than others, when China’s Covid-19 picture has deteriorated. But the share price reaction to the renewals highlights how much of a risk markets viewed the uncertainty over the licenses.
Investors feared the worst last year when the Macau government launched a gambling review, amid Beijing’s widespread regulatory crackdown, at a time when the casino operators’ licenses were up for renewal. Those fears included a range of concessions, increased scrutiny or even a cut to the number of licensed operators.
The licenses do come with conditions, which include boosting local employment, attracting tourists and pushing non-gambling offerings, Cheong Weng Chon, Macau’s secretary for administration and justice, said Saturday, according to The Wall Street Journal.
But it’s not nearly as bad as it could have been and the uncertainty now has been lifted. The other major factor that has kept pressure on Macau casino stocks is China’s strict zero-Covid policy. Widespread protests across the country, including in major cities, amid record daily cases means the virus once again is in the spotlight.
The eventual easing of China’s policy, whether it comes as a result of the protests or much later, could provide more upside for the casino stocks.
Write to Callum Keown at email@example.com