Macau’s mass gaming market could be negatively impacted by China’s devaluation of the yuan, according to Union Gaming Research analyst Grant Govertsen.
“Based on the current two-percent decline in value of the renminbi, we would expect the mass market story to be negatively impacted by up to two percent over the coming weeks or months,” he told the Times.
China’s Central Bank allowed the yuan to drop further against the US dollar on Wednesday. One day after it had decided to devalue its currency by 1.9 percent, China’s Central Bank allowed another drop, this time by 1.6 percent.
The depreciation of the yuan against the US dollar sparked fears of a negative impact on retailers, for instance, in Hong Kong, since the Hong Kong dollar is pegged to the greenbag.
Mr Goversten believes that the implications of this move on Macau’s gaming market won’t be too serious.
Nevertheless, he stated that, “If we were to think about how this could influence the behavior of Chinese customers to Macau, our view is that it would be the mass market customer who would feel the greatest impact.”
The gaming analyst recalled that unlike VIP customers, who have almost unlimited resources, mass-market gamblers have a finite amount of money that they would bring to Macau.
“So if your budget is RMB 2,000 and one week ago you exchange that for Hong Kong dollars… and then you would come back this week and those same RMB 2,000 get you two percent fewer Hong Kong dollars. As a result, your bank roll is a little bit smaller,” he added.
Although the yuan’s current devaluation is said not to play a big role on Macau’s mass gaming industry, risks of an impact on gaming revenue might arise if the currency falls further.
“Should the central government decide to let the renminbi devalue even further, then there’d be even greater risk of mass market revenues declining even more I think that’s what we are seeing today [Wednesday] with the stock prices down for the most part around six percent for the big [gaming] operators,” Mr Govertsen said.
The gaming analyst acknowledged that the future of Macau is much more mass-market-focused, which makes the industry want to avoid “any pain being brought to the mass market customer.” But again, Mr Govertsen pointed out that “Macau has been caught in the cross fire.”
“Things like this are entirely out of the gaming operators’ and local government’s control,” he stressed.