Morgan Stanley: Macau, other Asian gaming markets not seriously hit by China's tighter controls

Morgan Stanley Asia said Thursday that the impact of China's central government's restrictions on the local gaming industry, including Macau, would be limited.

The international investment banking group stated in a release that the recent tightened controls, which cover industries like education, property and technology, are “less relevant” to the casino industry. 

This month, China’s Ministry of Culture and Tourism indicated that it will “blacklist” what it termed a “third batch” of overseas destinations that attract Chinese tourists for gambling activities, while working with several other government departments to “suspend tour groups and arrangement of tourist visas” for outbound travel to these destinations. With the exact list of counties still undisclosed, analysts have suggested it is primarily targeting emerging Southeast Asian gaming jurisdictions such as the Philippines, Cambodia and Vietnam, or Australia.

Following this set of measures from Beijing, investors in gaming stocks have been worried about “regulatory tail risk,” Morgan Stanley said. However, the brokerage added that compared to the other regulatory measures, those imposed on gaming businesses are not new.

"China first introduced an overseas gambling blacklist in Aug 2020 (which was expanded twice in 2021) and increased penalties for overseas gambling in March. Yet, China resumed IVS visas to Macau in Sept 2020 and Macau is the only place gambling is legal in China. We think this suggests China will continue to allow gambling in Macau despite potential regulatory headwinds," Morgan Stanley said in the note, as reported by Macau Business.

Macau’s total visitor arrivals totalled approximately 3,928,000 as of June, up 20.2% year-on-year. VIP results – represented by VIP baccarat – dropped by 6.8% in the second quarter from the previous three months to almost MOP8.5 billion, now representing 33.5% of total gaming make-up. Casino mass results increased by 16 per cent quarter-to-quarter.

Morgan Stanley projected that base and middle mass or slot segments will fare better than VIP or premium mass segments, as China is stepping up efforts to develop “common prosperity,” a development plan intended to build a modern socialist country. The firm remains positive about Macau’s gaming industry, eyeing border reopening and the extension of casino concessions in the second half of this year.