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There has been a lot of bad luck recently, and today it's the gaming industry's turn!
On Wednesday, another sector in the Hong Kong market was raided. The gaming industry suddenly plummeted, with the gaming industry index plummeting nearly 17%. Sands China, which has a market capitalization of nearly HK $140 billion, fell nearly 33%, and other stocks also fell sharply.
So, what happened? Analysts believe that it may be related to two reasons: first, Macao's economic and financial secretary, Li Weinong, issued a notice on Tuesday night that he would conduct a 45-day consultation on the gaming industry from Wednesday, saying that there were still some deficiencies in the regulation of the industry. Second, the global economic downturn has affected consumption to some extent, with domestic retail sales growth slowing to 2.5% in August from a year earlier, well below the 7% estimate in a Bloomberg survey of economists.
Judging from the performance of A-share consumer stocks on Wednesday, it is also reflecting the current situation of insufficient consumption. Consumer ETF fell nearly 1.8% throughout the day, and the liquor sector fell across the board. So, do we still have spring in Maotai?
Gambling stock "9.15 tragedy"
Gambling stocks in Hong Kong suffered a collective fall in early trading on Wednesday. Wynn Macau led the decline, falling as much as 34 per cent at one point, a record low, followed by sands china, which fell 28 per cent. Fellow MGM China, Galaxy Entertainment, SJM and Melco Resorts and Entertainment Ltd all suffered heavy losses. Subsequently, the decline diverged, with Sands China's decline further widened to more than 30 per cent, as did Galaxy Entertainment, City of Dreams International Development and SJM Holdings.
So, what happened? Analysts believe the Hong Kong market could be spooked by the Macau government's proposal to change the gaming law as Macau's lucrative casino licence is re-tendered next year. When the current license expires in June 2022, everyone must re-bid for the license.
Li Weinong, Macau's economic and financial secretary, issued a notice late on Tuesday that he would conduct a 45-day consultation on the gaming industry starting on Wednesday, saying there were still some deficiencies in the industry's regulation, according to Reuters. Some Hong Kong equity analysts quickly downgraded their views on the near-term prospects of casino operators in the Special Administrative region of China.
DS Kim, an analyst at JPMorgan Chase & Co, said the bank had downgraded all Macau gaming companies from overweight to neutral or underweight because of increased scrutiny of capital management and day-to-day operations prior to licence renewal. "We admit that this is only a 'directional' signal, while the actual level of regulation / enforcement is still controversial." "the announcement has planted the seeds of doubt in the minds of investors," he said. "
Macao has sharply tightened censorship of casinos in recent years, with authorities cracking down on illegal capital flows from Chinese mainland and targeting underground lending and illegal cash transfers. In June, the number of gaming inspectors in Macau more than doubled and a number of departments were restructured to strengthen regulation.
George Choi, an analyst with Citigroup Inc in Hong Kong, said that although the details provided in the public consultation document were limited, the proposed amendments could promote the long-term sustainable growth of the industry, which could have a positive impact on the six casino operators.
However, he warned that "given the low investor sentiment, we would not be surprised if the market focused only on the potential negative impact". Since the beginning of 2020, Macao has been struggling with a shortage of tourists due to the containment of the coronavirus. Although gambling revenues have rebounded in recent months, they are still less than half of their monthly income in 2019.
Consumption needs to recover
The decline in gaming stocks may also reflect the fact that people are losing their spending power.
Consumption data released today show that in August, retail sales of consumer goods totaled 3.4395 trillion yuan, an increase of 2.5 percent over the same period last year, with an average two-year growth of 1.5 percent, down 2.1 percentage points from July, and an increase of 0.17 percent month-on-month. From January to August, retail sales of consumer goods totaled 28.1224 trillion yuan, an increase of 18.1 percent over the same period last year, with an average growth rate of 3.9 percent in two years. The growth in retail sales of consumer goods was well below the 7% estimate in a Bloomberg survey of economists.
In this context, the performance of consumer stocks is also relatively weak today. Among them, the performance of liquor stocks is particularly lacklustre. According to a spirit merchant who revealed on a public platform that he has sold 50 million yuan of Maotai this year. He believes that liquor has been rising for five years, the cycle of this rise is too long, it has reached a relatively high level, and the consumption power of society is also declining. The whole market needs rest and recuperation.
Lu Ting, chief China economist at Nomura Holdings in Hong Kong, said that so far, the market has seriously underestimated the scale of the slowdown in the second half of the year. The authorities will adhere to the "short-term pain to seek long-term gains" approach, and may maintain restrictions on real estate.
Larry Hu, head of China economics at Macquarie Securities in Hong Kong, said that while consumption should rebound in September, the economy will remain in a broad downward trend in the coming quarters. Policy should ease slightly through faster government bond issuance and more lending lines, but it is too early to loosen controls on real estate and local government debt.
For quite a long time in the past, there was a strong positive correlation between the two industries, infrastructure and real estate, and the consumer sector, that is to say, infrastructure and real estate can stimulate consumption. This correlation can also be seen from the data this time. This means that in the past, most of the private wealth growth came from fixed asset investment. Judging from the current situation, it is necessary to change the growth mode of private wealth. But this transformation will take time.
How does the market go?
In fact, to be fair, the recent market has not fully reflected the expectations of economic growth. The recent turnover of the A-share market has been maintained at more than one trillion yuan, the daily limit of individual stocks is also quite a few, and the rise-fall ratio of individual stocks is also maintained at a better level. How long will this situation last?
First of all, we may have to pay attention to the changes in the peripheral markets.Recently, the U. S. stock market has continued to weaken, and the Dow and S & P 500 are showing some signs of technical breakthroughs. It is worth mentioning that this situation has not been changed by Tuesday night's inflation data. This means that the market is already beginning to reflect expectations of the Fed's shrinking table. Although some market participants have pointed out that there is no need to worry about the external market, structurally speaking, if changes in liquidity in the external market lead to a sharp fall in commodity prices, it is enough to cause domestic commodities to follow suit.
Secondly, the matter of EvergrandeThere are even some other radical large real estate companies how long things will ferment and how big the impact will be. There are some inaccuracies in this. Today, real estate stocks continue to fall.Jindi GroupAt one point, it was close to the limit.
Third, from the tuyere point of view, now the daily disk looks quite lively, but not particularly focused, the persistence of the tuyere is greatly weakened.The market even rose by the limit today and fell sharply tomorrow, and some high-level stocks began to forcibly pull out the main rising waves. After the sky-high price of lithium yesterday, there is no overall market today, exceptGanfeng LithiumIn addition, the performance of other stocks is quite mediocre, and some even fell. "see the advantage and run away" is a typical feature of a weak market. Follow-up may need to focus more on risks than opportunities.