the monthly DICJ report

Yesterday, the Macau Gaming Inspection and Coordination Bureau (DICJ is the Portuguese acronym) released monthly results for December for the casino  gambling market in the SAR.  The figures were substantially higher than consensus expectations.  This is presumably the reason why the US-based gambling companies with significant Macau presence, LVS, WYNN and MGM, were up so sharply in New York trading.

The amount won from gamblers by the Macau casinos last month was MOP 28.2 billion, or about US$3.5 billion.  That’s an all-time high for the market there.  It’s also up 19.6% year on year, the strongest rate of increase since last April.  (By the way, these “win” figures suggest Macau visitors laid down a mind-boggling US$70 billion in casino bets during December.)

As you can see from the figures at the bottom of this post, the monthly numbers don’t yet show a clear upward trend.  But to my mind they do strongly suggest that the worst for the market is behind it.

it’s the economy that’s important, not just casinos

This isn’t just about casinos and the penchant for wealthy mainland Chinese citizens to gamble.  A 13% month on month jump in gambling activity–last year, when China was beginning to worry about economic slowdown, November and December were flat–likely means that the domestic economy is starting to perk up.  Purchasing Manager statistics from the usually reliable HSBC suggest the same thing.

It may be that stimulus measures from Beijing are beginning to work.  I also think that it’s no accident that the Macau uptick comes the month after new leadership for the Chinese Communist Party has been named.  I’m willing to believe that there’s something to the talk about a crackdown on corruption emanating from Beijing.  But I also believe that it will be limited to scrutiny of the activity of a very small number of families highly plugged in to the previous regime.  Certainly, Macau visitors don’t appear to be be concerned about displaying their wealth.  Another confirming bit of evidence: Hong Kong-based Chow Tai Fook Jewellery (HK: 1929) is up by 35% since Halloween, while TIF is down by 6% over the same span.

The bottom line:  We’ll know more in the next month or two, but the Macau gambling market may be a good indicator that Chinese economic activity is increasing. That should be good for any global company with direct or indirect exposure.  Good for the casino companies, too, although I think the story for them over the next year or two will be the development of their non-casino entertainment businesses.

The DICJ figures:

Source: Macau DICJ