Macau Casinos Sink On 6% Aug. Rev Drop; Will Plenum Ease Crackdown?

Macau casino stocks will remain under pressure at least until the Chinese Communist Party's major policy meeting, called a plenum, concludes in October, an analyst wrote Tuesday. Share in the sector traded on U.S. exchanges fell sharply Monday on news that August Gaming revenue in Macau fell 6 percent to $3.6 billion -- the third straight month of declines. Nomura's Harry C. Curtis blames the revenue drop on China's on-going corruption crackdown. Some 84,000 officials were disciplined for "performance failures" in the first half of 2014 according to the state-sponsored China News Service. People who have business dealings with the Chinese government or work in sectors with significant governmental inputs "have largely suspended their discretionary spending to avoid any unwanted attention," Curtis wrote in a note Tuesday. Macau's slowdown, particularly in the VIP and high-tier premium mass segments, is most likely a result of the loss of revenues from these high-spending customers who make up an important segment of Macau's top-end customers, Curtis said. Although Curtis is hopeful that nervousness will fade following the October meeting, it's expected that the meeting will result in a reorganization of China's propaganda department to expel any resistance to the anti-corruption campaign, according to New York-based New Tang Dynasty Television. A theme of the policy meeting will be "the rule of law," according to the China News Service. Shares of Las Vegas Sands Corp. LVS and Melco Crown Entertainment Ltd. MPEL were each off more than 6 percent Tuesday; Wynn Resorts Limited WYNN fell more than 5 percent and MGM Resorts International MGM shares were down 4.5 percent.