3 minute read
LAST WORD
Politics prick Asia’s gambling bubble
Sharon Singleton | Managing Editor, AGB
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As 2018 draws to a close, it looks like another year that started well in Asia’s gaming industry is going to fall victim to geopolitical forces beyond its control.
The main victim is again likely to be Macau, where analysts have been reworking their estimates for this year and next as the gambling hub begins to feel the impact of the slowdown in Mainland China’s economy.
President Donald Trump’s trade war with Beijing is hitting the pocketbooks of Macau’s main clients and at the very least cutting the feelgood factor of mainland business entrepreneurs, especially in the export-intensive southern provinces.
October gross gambling revenue edged up 2.6 percent after a gain of just 2.8 percent in September, when casinos were forced to close due to a direct hit from Typhoon Mangkhut. But even before that VIP revenue had been slowing for several months.
It was a sharp turnaround from the first few months of the year, with GGR in January surging just over 36 percent to post its best month in four years. For the first half, expansion stood at almost 19 percent, although unless there is a major change in fortunes, the second half will have been a washout.
There doesn’t appear to be an end in sight either, with no signs either side is willing to drop the brinkmanship in the trade battle.
The impact on other markets around Asia has so far been less evident. There had been speculation that Australia’s IRs, which have become increasingly reliant on Asian VIPs, may suffer. They took a particularly hard hit to revenue after Beijing’s corruption clampdown shrivelled up the VIP market a few years ago. However, to date, that doesn’t appear to have been the case.
In an October research note, Morgan Stanley said the VIP market appeared solid with ample junket liquidity. It said further afield, growth also remains strong, especially in the Philippines and Cambodia.
Although existing IRs in the Philippines have continued to gain ground, the industry as a whole there has had more than its fair share of ups and downs this year, leaving major question marks about the potential for future expansion.
Mercurial President Rodrigo Duterte has made it clear he doesn’t like gaming and the on again - very quickly off again - pronouncements on major projects give the impression he and his gambling regulator are not always on the same page.
It now appears highly unlikely Galaxy Entertainment and its local partner Leisure & Resorts World Corp. will be able to proceed with their plans for an IR on the island of Boracay. The announcement the island would be closed to tourism for an environmental cleanup and no casinos would be permitted came just days after The Philippine Gaming and Amusement Corp. announced with fanfare the companies had been granted a license.
Since then, the rhetoric has only hardened with the government ordering the closure of a couple of existing facilities on the island.
Landing International’s project near Manila has suffered a similar fate. The government chose to announce it was sacking the entire board of its local partner during a high-profile ground-breaking ceremony, throwing the plans into chaos. Shares in the Hong Kongbased company have lost three quarters of their value, after the fallout from the Philippines debacle was exacerbated shortly afterwards by the disappearance of Landing Chairman Yang Zhihui. He was still missing as of the time of going to print.
Looking forward to 2019, there have already been some predictions that the gaming industry in Asia will continue to fall prey to politics. Spectrum Gaming is betting that Beijing will seek to crackdown on online gambling sites targeting China, with major implications for the Philippines and Cambodia, which have both seen a massive influx of Chinese capital.
For the land-based sector, it remains to be seen how deep the trade war cuts into local economies and spending.
