A couple of rating agencies warn that the latest coronavirus lockdown could further delay the recovery of the Macau gambling industry. The latest restrictions could also negatively impact interest rates and drive them higher, according to the rating experts.
As we reported earlier this week, casinos throughout the special administrative region are forced to shut down their operations from July 11th to July 18th due to the rising coronavirus cases. This is the first lockdown the gambling industry has witnessed in two years.
The bond credit rating company Moody’s Investors Service said in a report yesterday local gambling businesses were facing lower tourist rates due to the travel restrictions and the recent business closures. The gambling sector in the administrative region has already taken a severe hit as a result of the economic upset caused by the pandemic.
Last month, Macau’s gross gaming revenues (GGR) dropped 62% year on year to MOP$2.5 billion (US$306 million) as opposed to the results for the same month in 2019 when the industry reported MOP$23.8 billion (US$2.9 billion) in gross profits.
Moody’s Investors Service projects this year’s gross profits for the mass segment will remain low at approximately 30% compared to 2019. The industry could see an improvement to 70% next year. According to Moody’s report, the mass segment of Macau’s gaming industry is likely to fully recover in 2024, leading to considerable improvements in the local gambling businesses’ credit metrics.
Moody’s senior credit officer Gloria Tsuen said the sluggish recovery due to traveling restrictions poses a threat to the local industry, even more so for gambling businesses that operate only in the administrative region.
S&P Global Ratings Foresees Recovery of 50% to 70% in 2023
Experts from S&P Global Ratings echo these sentiments, warning that the tougher measures in Macau could slow down the industry’s recovery not only for 2022 but also for 2023. Last week, the credit rating company adjusted its forecast for the region’s GGR to 20% to 30% compared to 2019. Before the new lockdown came into effect this week, the agency’s estimates stood at 30% to 40%.
S&P Global Ratings foresees a recovery of 50% to 70% in 2023, compared to its previous forecast of 80%. Similar reductions were observed in Morningstar’s GGR projections, which dropped from the earlier 40% to 70% to mid-20% and 60% earlier this week.
Most businesses shut down on Monday. Hospitals, pharmacies, and supermarkets are among the few exceptions exempt from the lockdown. Residents of the region are largely restricted from going outside, with police officers patrolling the streets to ensure they comply with the rules.
These restrictive measures could spell bad news for the gaming industry’s recovery, according to Ben Lee from the Macau-based consultancy company IGamiX. Lee said recording a hike in coronavirus cases was inevitable to a certain extent, considering Macau’s open border with China and the surge observed there.