No need to panic over Macau policy risks: Bernstein

While recent headlines are a reminder of Macau’s susceptibility to policy risks, the impact is minimal over the long term, said Bernstein in a Tuesday note.  

In December last year, Macau’s government moved to cut the daily withdrawal limit from MOP10,000 (US$1,251.9) to MOP5,000 for UnionPay ATMs.  

In May, Macau’s banks made it a requirement for some merchants to upgrade Union Pay terminals to ones that contain ID readers. As well as this, Mainland customers using UnionPay credit cards became required to produce identity cards or passports when shopping in Macau.

More recently, the government announced new KYC measures in ATMs in Macau in order to combat capital flows out of China. The measure effects UnionPay card holders from China, but does not affect holders of UnionPay cards issued in Macau or other places outside the mainland.

“Over the past few weeks, several incidents have led to a reemergence of policy risks that may dictate the performance of Macau’s gaming industry… Macau stock prices reacted negatively to news of policy risks in the short term, but the impact has been minimal over the longer term,” said Bernstein.

According to the brokerage, the current stock prices of Macau’s gaming operators (for the most part) already reflect the potential risks.

“Our long-term investment thesis of Macau as a secular long-term growth story (driven by Mass) remains intact and policy risks are generally reflected in current valuations.”

The brokerage also notes that China’s anticorruption campaign appears to show signs of moderation – a factor which has contributed to the recovery in VIP demand.