Macau to lose over tightening liquidity: Bernstein

Reduced liquidity in mainland China in 2017 will create headwinds for high-end gaming in Macau, say Bernstein analysts. 

In its report titled “China Liquidity: Who are the winners and losers when the tide is going out?” the brokerage looks at the implications of tightening liquidity on China’s markets.

“Liquidity remains a key driver for Macau’s VIP gaming segment,” said Bernstein in its note released Tuesday. “Cheaper and more easily available capital in China improves junket liquidity and allows greater lending to VIP players.”

The real estate market will also have an effect on VIP gaming, as real estate assets can be used as collateral for gaming credit in Macau, says Bernstein.

“Junket agents are more likely to extend gaming credit with a more liquid property market in China.”

“We expect that tightening monetary policies for the rest of 2017, leading to reduced liquidity and a less robust real estate environment in China will create headwinds to VIP in 2017, which should lead to slower growth in VIP than has been experienced over the past few months,” said Bernstein.