Economic domino effect of coronavirus

by Noah Taylor Last Updated
Coronavirus causes market downturn

The coronavirus has caused casino shares to plunge due to travel bans, but the long term impact of the virus could make things even worse.

Calvin Ayre reports that Fitch Solutions Macro Research believes a slowdown of the Chinese economy is the real threat.

The research firm rightfully points out that the immediate threat is in restrictions on travel.

“Even if the coronavirus is contained, a prolonged slowdown of the Chinese economy would weigh on gaming revenues,” they wrote.

“Over the coming months, we expect Macau’s services exports, which accounts for approximately 80 per cent of GDP, to take a hit as the coronavirus epidemic will significantly impact tourist arrivals from the Mainland.”

The knock-on effect to the Chinese economy, and what that means to VIPs who would normally visit Macau, is the long term nightmare some are starting to realise.

“We currently forecast China’s real GDP growth to slow 5.9 per cent in 2020, from 6.1 per cent in 2019,” they wrote.

“Indeed, gaming revenues have already contracted by 2.5 per cent year-on-year over in January to November 2019, amid slowdown of the Chinese economy.”

That’s not all, the forecasts could get even worse.

Macau casinos are currently shut down for a period of no less than 15 days, to help deter the potential spread of coronavirus.

That closure period could go on longer.

“Given that a vaccine to the coronavirus has yet to be found, we note a significant risk of an extended closure of the casinos.”

This, added to Macau’s new focus on re-aligning with China’s interests, could also mean a severe lack of cash available to the region.

“However, given that gambling remains illegal in mainland China, Beijing could implement means to tighten scrutiny of funds flowing from Macau into the mainland.

This could introduce greater bureaucracy into the system and deter investors.”

Donations continue to fight coronavirus

Several casino-related companies have stepped up to try to prevent things from getting worse in the hardest-hit areas.

Meg-Star Group, a junket operator, and Melco Resorts and Entertainment, came forward with sizable donations, about $3.84 million total, for the Hubei province in China, as well as the epicentre of the outbreak, Wuhan.

As more precautions are being taken to further control the epidemic, additional companies in the gaming industry are stepping up, willing to make financial contributions to help support treatment and containment efforts in China.

Last week, Galaxy Entertainment Group issued an announcement that it would donate MOP$25 million (US$3.12 million) to the Hubei province and Macau.

The money is being allocated from the company’s Galaxy Entertainment Group Foundation, with $2.49 million earmarked for Hubei and the remaining $624,500 going to Macau.

Joining the effort is Guangdong Group, a Macau junket operator.

It is, through its Guandong Charity Foundation, donating $1.3 million to Hubei and Macau in the form of medical and preventative supplies.

It is also cancelling public activities and will provide free face masks for all staff members in an attempt to keep the virus from spreading.

SJM has become the latest to give to the cause, allocating $2.49 million.

Some of the funds are to be used for purchase of medical supplies and protective gear, and the contribution was coordinated with China’s liaison office in Macau.

SJM chair Daisy Ho added: “The donation carries with it our sincerest wishes for the Hubei people and for our Motherland.

“SJM stands firmly with the Macau SAR government and all Macau people in efforts to contain the spread of the coronavirus.

“We wish a speedy recovery to all people and all economies that are affected by the virus,” Ms Ho said.

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