[ad_1]
We know that China's economy is dramatically slowing down, and one of the places where you can see Macau, the gambling capital of the world.
Wall Street was reminded of that on Wednesday, when Wynn Resorts reported earnings. While the third quarter did not look that bad – Macau revenue was up over $ 200 million from the same time a year before – the casino giant had a dark outlook for the fourth quarter. Wynn projected earnings Wall Street expected.
According to analyst Cameron McKnight at Credit Suisse, this implies that the Macau gambling market could be negative over the last two months of 2018.
"Wynn noted that Golden Week was very much in the aftermath," said McKnight wrote in a note to customers. "Further, the company noted that it is not very much in the nature of their guidance and that their guidance is extremely conservative or the market has turned negative in November and December."
Wynn's stock fell 12% on Thursday following the report.
Wynn makes the lion's share of its revenue from its two Macau casinos, so it's more likely to market volatility.
But of course this would be bad for the entire industry. A slowdown of the kind Wynn is a flashback to a dark time for the world casino, when a slowing down
Now there are some on Wall Street, like Carlo Santarelli at Deutsche Bank, who think that Wynn made an "overly conservative guide."
And the gentleman is entitled to his opinion.
Macro goal data is on Wynn's side. As McKnight notes, gaming is back in the past year, and it's about a month ago.
And then there's the housing market. McKnight posits that Macau gambling income lags Chinese housing prices by 8 months.
All spells of signals in China are flashing red right now. Earlier this week S & P warned that weaker Chinese property developers were in danger of default. Housing sales fell 3.6% in September, and new research indicates that 22% of all homes in China are unoccupied.
So far, as Societe Generale economist Wei Yao pointed out to customers, China's real estate investment – which makes up half of all investment in the country – has stayed pretty stable. But she does not see that lasting very long.
From a recent note to customers:
Investment growth from 13.8% in 2Q to 14.5% in 3Q, despite the slight moderation to 8.9% in September from 9.3% in August.
Growth in new floor space started over 27.8% in 3Q – the quickest since 2014 – from 16.6% in 2Q, thanks only to positive base effects.
In contrast, housing sales contracted by 3.6% in September, bringing down the quarterly growth rate to 2% from 3.1%. We still believe that demand determines supply, and the result is not sustainable."
The world will get fresh credit data from China next week, and perhaps it will be possible that these policymakers have decided to loosen the conditions in the face of a downturn and a potential trade war with the United States.
Even so – since Chinese is leading Macau will be able to help you.
The question is not going away, but how long is it going to last.
Source link
