Macau Stocks Surging Following Report Of Smoking Ban Reduction

Shares of the four U.S.-listed Macau casino operators are surging on Monday following a report by Macau Business that the Chinese government may be planning to scale back its current plans to ban smoking in rooms on gambling floors in Macau resorts. The report cited Secretary of Social Affairs and Culture Alexis Tam Chon Weng.

Regulatory headwinds
The Chinese government has been a source of frustration for Macau investors in the past year. First, a government crackdown on corruption in Macau is the primary driver behind recent falling gaming revenues. The crackdown has hit VIP revenue in Macau especially hard.

In addition, the government has restricted the number of visits to Macau and the duration of those visits for mainland China residents.

Finally, the original smoking ban proposal would eliminate all smoking in VIP rooms and put an end to the smoking lounges on mass gaming floors. However, Weng reportedly told Macau Business that the government could potentially allow resorts to maintain smoking rooms if they can prove that they are not adversely affecting the health of employees and other customers.

Change of heart?
The latest news on a potential reduction of the scope of the smoking ban is the second recent indicator that the Chinese government could be stepping in to provide some much-needed support for ailing Macau operators. Earlier this month, the government decided to scale back the visitation restrictions for mainland residents.

Stocks react
Shares of Melco Crown Entertainment Ltd MPEL, Las Vegas Sands Corp LVS, MGM Resorts International MGM and Wynn Resorts Ltd WYNN are all trading up more than 3.5 percent on Monday following news of the potential for a toned-down version of the smoking ban.

Caesars Entertainment Corp CZR recently blamed New Orleans’ city-wide smoking ban for a 16 percent revenue decline in its Harrah’s New Orleans Casino.

Disclosure: the author owns shares of Melco Crown Entertainment.