Credit Suisse Macau Stock Warning

Why Avoid Buying Macau Stocks? I break down Credit Suisse & JP Morgan financial experts’ opinions on the current state Macau’s casino market. (Image by Piaxbay from Pexels)

If you are someone into trading stocks and shares, and one of your markets to meet diversification in your portfolio is gambling, you may want to read this.

Today’s top-performing gambling stocks tend to be in iGaming or with companies like Playtech PLC, and Inspired Entertainment Inc which supply online and retail sports betting, iGaming and land-based casino games, technology and solutions. However, when diversifying your portfolio, you may also consider land-based establishments, and Macau could very well be on your list.

However, in recent financial reports, Credit Suisse experts have suggested you avoid buying Macau stocks. And of course, this wasn’t a flippant comment made in passing. The suggestion came via expert financial analysis by Credit Suisse analysts Sardonna Fong, Kenneth Fong, and Lok Kan Chan.

The trio’s opinion on the matter is clear – “Buying such assets could result in unpredictable and dangerous investment scenarios”.

With restrictions in the region due to China’s strict COVID-19 rules, Macau casinos are in for a rough ride. And yes, we are back on that subject again. Just when you thought COVID-19 was no longer an issue, well, it is still a topic of hot debate across China. And Macau is not going to open its borders until at least 14 days of zero cases of covid being reported. The downside here, and this is my question by the way, is what happens when covid inevitably finds its way back into Macau?

For now, China’s zero-COVID policy is severely affecting Macau casinos, which are closed for business with Q1 2023 earmarked for reopening. Credit Suisse analysts stated that a reopening does not mean Macau stocks will instantly bounce back. Recovery will be slow, although apparently there is room for an ‘upcycling’. Albeit this is only going to happen when or if recovery kicks in.

In the short term, the market looks bleak, but in the long term, Macau could be worth keeping an eye on. According to some analysts, if indeed Macau does reopen in the forecasted Q1 2023 window, it is worth checking stock prices which in theory will be at an all-time low and ready to recover. It’s all speculation of course, but food for thought.

Check the ins and outs first and see if it’s the right one for you. For the full report on Macau, check out the IAG report here.

JP Morgan’s Livy Lyu and DS Kim Pitch In

According to 2 JP Morgan analysts, liquidity in Macau is still good. Sands and SJM may be in trouble as their liquidity suggests the companies can last until March 2023. They are certainly a risk. However, MGM, Melco, and Wynn have a good 1.5 and up to 2 years of liquidity. Now, this is me pitching in again, but imagine a scenario in which Sands and SJM have to exit the market. Then, a recovery ensues with only MGM, Melco, and Wynn open for business. That Sands and SJM business has to go somewhere, which in theory would speed up MGM, Melco, and Wynn.

Take it with a pinch of salt: Just take note. China could completely reverse its Q1 2023 decision. Nothing is guaranteed in this market, and although the JP Morgan due look optimistic, it is wise to take the trio of Credit Suisse analysts’ take on the situation on board.

My opinion on stock investment in Macau in the current global climate

In the midst of optimism for the market, the trio has put a question over Macau’s current state of affairs. Now, before reading their report, I must admit, I was clueless as to the financial ins and outs of Macau stocks. However, knowing that China has locked itself in with strict Covid rules, my assumption the super-wealthy from Southeast Asia and the Far East are not visiting.

This leaves only wealthy Chinese businessmen, but that’s a far cry from a fully operational casino market meeting its full potential. One that would mean maximising the Macau casino market’s exposure by allowing international visitors in with few restrictions. I would assume this type of market would then earn huge profits and in turn have a positive effect on Macau stock prices. However, that is not the case.

Now I invest in stocks, but for the reasons above, I had not even considered Macau. If I were considering land-based stocks, as I call them (non-iGaming), I prefer Vegas and Atlantic City casinos. And those that do not have a commitment in Macau at that. I.e., not Wynn Resorts which has a vested interest in the Macau market. Caesars is perhaps the most interesting at this time because the company has sold its entire non-US assets. Case and point is the recent confirmation of the sale of its William Hill International division.

Now Macau will likely come back onto my radar when the land-based casino market opens to the wider international community. Diversification when investing is not just about buying stocks in different industries, it is also about buying stocks in different regions within those industries. A tip courtesy of Warren Buffet I have always stuck with. Take it as you will. I am not saying it’s a full proof strategy, but it’s a principle I like to stick by.

Is gambling a safe investment? I am not one to give advice, and I cannot tell you for certain which stocks are a great investment. However, gambling companies could be worth adding to your portfolio as long as your research the company before committing. It’s the same as committing to a live casino.

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