Casino shares soar after China slackens visa travel rules

While Americans often associate Las Vegas or at a stretch Monaco as the center of all things gambling, the title of the "gambling capital of the world" is actually held by Macau.

The history of casinos, table card games and sports betting in the autonomous Chinese region (and the only part of the country where gambling is currently legalized) actually dates back to the 1850s when it was ruled by the Portuguese. According to some recent numbers from Statista, the region generated over $5.3 billion USD from games and gambling in 2022.

Related: Las Vegas Casinos Should See Bump From Macau Reopening

Just like for Hong Kong, visiting Macau as a foreigner is subject to less stringent visa rules than for the rest of China (Americans can visit for less than 30 days without a visa). That said, the reputation around China being a hostile country for Westerners was still drawing away some visitors outside of Asia.

Slackened Chinese visa rules are affecting the stock market

This became very clear when news broke that the Chinese government was slackening certain travel rules for both foreigners and Chinese residents — the shares of a number of large Macau casinos immediately spiked as a result.

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Currently at $21.26 USD, shares of MGM China  (MCHVF)  rose by  nearly 5% between Friday and Monday morning while Wynn Macau  (WYNMF)  stock is also up 6% at $10.79 USD. The increase comes as a result of China taking in multiple steps to draw in both international and domestic tourists post-pandemic. At the end of last week, the government extended visa-free tourist entry for citizens of countries such as Austria, Germany and France while also making it easier for residents of provinces such as Shanxi and Heilongjiang to apply for an "individual travel endorsement" and "group travel endorsement" (mainland Chinese residents need such entry permits to travel to Macau and Hong Kong).

In a note to the firm's investing clients, Seaport Research Partners gaming industry analyst Vitaly Umansky said that the loosened travel rules will bring in more visitors and therefore more gambling action and money left behind to Macau. The firm forecasts significantly faster growth than for U.S. markets such as Las Vegas and Atlantic City.

'We have a more positive view on the Macau pure play stocks'

"Our gaming thesis is largely driven by continued recovery and growth in the Macau and Singapore market in 2024 and 2025," Umansky wrote in a note earlier this year. "While we have a long-term positive view on Las Vegas (and to a lesser extent the U.S. regional market), we forecast headwinds in 2024 in both Vegas gaming and in the U.S. regional markets (with negative growth probable). As such, in general, we have a more positive view on the Macau pure play stocks."

As first reported by Dow Jones, Seaport Research Partners currently has a buy rating with a $1.22 USD target price for Wynn Macau and $6.85 USD target price for Galaxy Entertainment  (GXYEF)  respectively. 

The latter Hong Kong-based casino company's shares also soared by 2.75% over the weekend as a result of the Chinese government's moves to make entry easier for travelers.

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