Slower Growth Forecast for Macau

Fitch Ratings recently published a report on Macau’s 2012 revenue forecast, expressing concern at the possible slowdown of China’s economy:

Fitch has revised its 2012 Macau revenue growth forecast to 10%-12% from 15%, reflecting our more cautious view with respect to the near-term impact of the slowdown in China.  This is our second downward revision over the last couple of months; as on June 8, 2012 market growth revenue forecast was reduced to 15% from 20% upon initial signs the slowdown was greater than original expectations. Macau market revenues grew 42% in 2011 and 58% in 2010.

Overall market revenues were up almost 20% year to date through June.  However, the slowdown became noticeable in May when revenues grew only 7.3%, followed by 12.2% in June. We expect July to also reflect a sluggish trend, possibly in the low-single digit range, as Typhoon Vicente had some impact with the disruption of ferry service to Macau from Hong Kong.  Our updated forecast implies low-to-mid single-digit market revenue growth for the rest of 2012.

Macau still dominates the international gambling industry, however. Interwoven with the story of larger-than-life gambler Siu Yun Ping, The New Yorker’s Evan Osnos captured the gambling culture and growth of Macau in April, and put forward different theories to explain Chinese people’s propensity for financial risk:

Gary Loveman, the chairman of Caesars Entertainment, was one of the few casino bosses who passed up a chance to build in Macau. “Big mistake,” he said later. “I was wrong, I was really wrong.” Even by China’s standards, the speed of Macau’s growth is breathtaking; for a decade, the economy has ballooned, on average, nineteen per cent a year—nearly twice as fast as mainland China’s. In 2010, high rollers in Macau wagered about six hundred billion dollars, roughly the amount of cash withdrawn from all the A.T.M.s in America in a year.

[…] “The economic reforms undertaken by Deng Xiaoping were a gamble in themselves,” Ricardo Siu, a business professor at the University of Macau, told me. “So people got the idea that taking a risk is not just O.K., it has utility.” For those who have come from poverty to the middle class, he added, “the thinking may be, If I lose half my money, well, I’ve lived through that. I won’t be poor again. And in several years I can earn it back. But if I win? I’m a millionaire!”

See also ‘Macau’s Gambling Industry: A Window on China’ at The Economist


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