Asian casino stocks lost big following a fresh outbreak in the ongoing trade war between China and the U.S. The decline followed President Donald Trump's announcement of new tariffs, which elicited a swift response from Beijing. The latest round of tariffs has tightened the geopolitical tension between the two superpowers, affecting sectors most reliant on Chinese economic activity and tourism, including the gaming and casino industry.
Key Insights
- The U.S.-China trade war is drastically affecting all casino operations in China
- Galaxy Entertainment Group was hit the hardest, with stocks dropping 12.4%
- U.S.-based operations, including Las Vegas Sands and MGM Resorts, also reported revenue declines after tariffs were imposed.
Casino operators with businesses in Macau and Singapore bore the brunt of the equities sell-off. Both markets are inextricably tied to the health of China's economy due to their reliance on inbound tourism and gaming income derived mainly from Chinese tourists. Doubt over trade policy and its potential impact on consumer expenditures and travel has injected fresh volatility into the casino sector.
Hong Kong-listed Galaxy Entertainment Group suffered the most significant decline among major casino operators, losing 12.4% in a single session. Its stock closed on April 7 at HK$26.40 (US$3.37), compared to HK$30.15 ($3.85) a week ago. The loss was among the biggest one-day decreases for the company in recent months.
Melco Resorts & Entertainment, one of the major players in Macau's gaming sector, also saw its share price drop drastically. It fell 9.8%, closing at US$4.80 from US$5.32 earlier.
Genting Singapore also faced the same downward pressure, and its share price fell by 7.5%. Company shares closed at S$0.675 (US$0.51), below S$0.73 (US$0.55) earlier. It operates Resorts World Sentosa, one of the two city-state integrated resorts, and relies heavily on regional tourism from China and other parts of Asia.
Impact strikes all operators in Asia
U.S.-listed gaming operators with major investments in Asia also experienced declines. Wynn Resorts, which has Wynn Macau and Wynn Palace as its assets, saw its share price decline 3.8% to US$70.09. MGM Resorts International, which is associated with MGM China Holdings, had a 3.7% decline in its stock, closing at US$26.86.
Likewise, Las Vegas Sands, which operates Sands China Ltd., and is meant to start construction in Singapore later this year after signing an agreement with the Singapore Tourism Board, also experienced an 8.4% decline in shares, from US$36.41 to US$33.37.
Trade tensions have created additional uncertainty for businesses exposed to the gaming industry in Asia, especially in areas where gaming revenues are highly correlated with mainland Chinese tourists.
Macau, the globe's biggest gambling center in terms of revenue, is already faced with regulatory pressure, a clampdown on junket operators, and broader attempts by China to deter cross-border gambling. Additional economic pressure caused by a trade war would reduce Chinese consumers' discretionary spending and limit outbound tourism, decreasing casino earnings in Macau and Singapore.
Analysts warn that further ratcheting of trade tensions might prolong the downward cycle for casino operators, in particular those whose profitability models rely heavily on mass-market tourist flow from mainland China and high-rolling visitors.
