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Why Are Gambling Stocks Falling Today?

Amid heightened scrutiny from government regulators in China, gambling stocks with exposure in Macau are likely to take a big hit.

First, it was tech stocks, then it was the gaming companies, and now it looks like the Las Vegas of Asia could be in for change — a gambling state which generates three times the revenue of its U.S. counterpart. 

So what does this mean for gambling stocks? 

Red numbers everywhere!

Investors in gambling resorts will be sweating at the numbers they’re seeing today, especially Wynn Resorts (NASDAQ: WYNN), which fell nearly 11% yesterday. 

In total, Macau casino stocks fell by roughly a third overnight, losing around $14 billion in value. Macau is a special administrative region of China, with its own separate government; a government that has just kicked off a regulatory overhaul that could see its officials supervising companies in the world’s largest gambling hub.

Increased government scrutiny is just the beginning, with one of the proposals on the table being a removal of the state’s current sub-concession system — basically, the gambling licenses currently awarded to Wynn, MGM China, Melco, Sands, and Galaxy Entertainment Group. 

These concessions are up for renewal in 2022 and were expected to be a no-brainer, but Beijing is now stepping in with a review of the whole system, raising questions over whether these companies will have their licenses renewed and, if so, whether it will be under strict — and expensive — new regulations. 

Gambling currently makes up 80% of government revenue in the region, as well as 56% of its GDP. Beijing appears to want this overreliance on gambling to change, opening up a public consultation and review of these processes until October 29th. 

So, investors with exposure to Macau, such as Wynn, might want to keep a close eye on this space.

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