A short discussion of the Gambling Industry across the Asia-Pacific region.

According to some industry estimates, the Asian gambling industry is worth approximately over USD 100.0 billion. It is a common trend among many Asians, especially the Chinese, who viewed gambling as an indication of wealth and affluence, and is normally being enjoyed by many during occasions such as the Lunar New Year, weddings, birthdays, etc. In a recent Bloomberg Industries report, which was discussed on the programme ‘First Up with Susan Li’ during Asian trading hours on June 27, 2013, the report pointed out that most of the gambling stocks, with a huge presence in Macau, rose by an average incremental figure of 80.0 percent year-over-year (YoY) in the past, but lately, with the talk of cash crunch in China, ongoing slowdown in the country, along with manufacturing cutbacks across many industries operating in China, the gambling stocks, as a group, have fallen by approximately 10.0 percent, and the Chinese market on the whole as gone down by approximately 20.0 percent to 25.0 percent. Most of the past performance of many gambling stocks operating in Macau was driven by VIP revenues, and the presence of junkets helping to attract the wealthy individuals to gambling halls in the Chinese territory. The gambling industry in Macau was seen as both lucrative, and more cyclical due to its proximity with Mainland China.

With all the talk over China’s impending slowdown and the volatility in the interbank rates in the country seen last week, has gambling among the Chinese people taken a backseat for now? In the same programme broadcast on Bloomberg Television during Asian trading hours, an analysis of Chinese Initial Public Offerings or IPOs, including one of the companies mentioned, China Legend Holdings, a major casino company with huge presence in Macau, was slated to delay its original listing to July 05, 2013, citing reasons including poor capital market conditions, slowdown in China, etc. On top of the delay in the listing on the Hong Kong Stock Exchange (HKSE), China Legend is hoping to reduce the number of shares currently being offered due to an expected lacklustre debut, and the overall volatile market conditions. There were talks in the past discussing about the impending slowdown in China and is now taking a toll on many Chinese stocks, especially the gambling stocks which are often tied to wealth and affluence of the Mainland Chinese tourists. These trends are not confined in China, but across Asia such as the Philippines, where the casino industry is just starting to pick up. However, a consortium led by Filipino businessmen, and Malaysian gambling tycoon, Lim Kok Thay, Chairman and CEO of Malaysian conglomerate, Genting Berhad, announced that they will be delaying the listing of Genting’s business in Philippines, citing the stock market volatilities, and lack of favourable response to the IPO in general.

With the recent shakeup in the gambling industry seen in Asia, the rise in many of these gambling stocks might be seen as unsustainable if the actual trends of a slowdown are attributable to the issues pointed out in that recent Bloomberg Industries report. South-East Asia is not entirely spared either from the impending slowdown of the Chinese economy, which has shown much resiliency to economic cycles in the past, and are now facing a falloff in VIP revenues, and lagging Mainland Chinese tourist arrivals. In addition, casinos located along the Malay Peninsula are now suffering from an ongoing haze situation across the region due to the widespread forest fires happening in Sumatra, and Borneo, Indonesia. The iconic Marina Bay Sands Casino and Resorts in Singapore, which is owned by Las Vegas Sands (LVS), bore the brunt of the fall in gambling revenues due to the haze as its brand name is well-known by many across Asia. It’s next door rival, Resorts World Sentosa, owned by Genting Singapore also saw a drop in its room bookings, and casino visits. Although the haze situation has become a seasonal trend in South-East Asia, the slowdown in room take-up rates is especially prominent this year, as China is starting to feel the effects of a slowing economy, and regional countries who are dependent on the Chinese trade has also suffered.

Over in Australia, and New Zealand, plans are currently underway for the construction of one of the upcoming gambling resorts owned by Australian billionaire, James Packer of Crown Ltd. The resort is situated close to Sydney Harbour, and is scheduled to be completed by 2015. The gambling industry in Australia and New Zealand is also being driven by Mainland Chinese tourist arrivals, and the general economic conditions of both economies, which has, in the past, rode alongside the rise in resource prices. However, with elections looming in Australia in September, the recent shakeup in the Australian Parliament, with former Prime Minister, Julia Gillard being ousted as Labour Party chief, and replaced by the former PM, Kevin Rudd, and the slowdown in the resource sector in Australia, it is relatively uncertain how will the outcome of the elections in September change the existing casino legislation laws in the country.

In conclusion, the gambling industry is increasingly facing various challenges, and the odds of climbing out of their woes is seen as challenging due to the fact that Mainland Chinese tourist arrivals across the Asia-Pacific region will, over a period of time, gradually diminish as a result of a fallout in economy, along with domestic issues including income inequality, loss of jobs, environmental issues, etc. Given that much of Mainland Chinese household wealth is driven by income, job security, business profits, etc., any talk of a slowdown in the Chinese economy will impact many industries across the board, and this includes gambling, which is often seen as a luxury lifestyle that many Chinese people indulge in, and is highly cyclical.

About Hock Meng Tay - Chief Editor, Asia-Pacific Region

Hock Meng Tay, CAIA has written 181 post in this blog.

Chief Editor, Asia-Pacific Region Hock Meng Tay is a CAIA holder and is currently taking CFA qualification. He has over 10 years of experience working as research associate in several investment companies.He is an expert in financial analysis and has published research reports in his current role. He obtained his Masters of Business Administration in Integrated Management and Masters of Arts in Economics while serving his internship in Starsource Inc