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A Bloomberg Intelligence index of Macau’s six major casino operators fell as much as 5%, taking losses this year to 28%. Sands China Ltd. plunged as much as 8.3%, while Wynn Macau Ltd. dropped more than 7%.
Casino bonds also fell sharply, with Melco Resorts & Entertainment Ltd.’s 5.25% note due 2026 dropping 3.6 cents on the dollar to 73.7 cents, on pace for a record closing low.
The government instituted mass testing of residents between Sunday and Tuesday, with 34 positive cases found in the local community as of Monday 9 a.m. Schools and non-essential businesses are shut until further notice. Restaurants, bars and casinos remain unaffected for now, though officials have encouraged them to take measures such as suspending dining-in services or operations to reduce visitation.
Macau hasn’t shut its casinos since an unprecedented 15-day closure in February 2020.
The Covid flareup is a fresh blow for the gaming sector, which has faced a tourism drought since the pandemic started. People from most places in mainland China, except high-risk areas, can travel to the enclave quarantine-free, but Covid outbreaks across the world’s No. 2 economy has been choking off Macau’s biggest source of visitation since March.
The city’s casino revenue plunged more than 60% year-on-year in both April and May, and operators are already burning through millions of dollars of cash every day. In line with China’s Covid Zero border curbs, Macau is closed to the rest of the world, while 10-day quarantines are required for travelers from Hong Kong, Taiwan and Portugal.
Gross gaming revenue is likely to hit “near-zero levels” for at least a few weeks until the situation is under control, JPMorgan Chase & Co analysts including DS Kim wrote in a note on Sunday. In a worst-case scenario of no revenue, SJM Holdings Ltd. and Sands will only have enough liquidity to survive until March next year, while most other operators have between one-and-a-half to two years of liquidity, Kim wrote. Galaxy Entertainment Group Ltd. has enough cash to last through five years, according to Kim.
Macau’s swift moves to try and stem transmission follows China’s Covid Zero playbook. The neighboring mainland city of Zhuhai now requires a week of home quarantine and another seven days of self-health monitoring, for those who arrive from Macau, according to a government statement on Sunday.
While casinos remain operational at the moment, the government could order a temporary suspension, Credit Suisse analysts including Kenneth Fong wrote in a note on Sunday. The outbreak would also hurt travel sentiment. “Players may choose not to come in the near term fearing they may not be able to return to their home town if additional cases are discovered,” he said.
Macau only last week had eased quarantine requirements for visitors after months of no local virus transmission, though they remained stringent by global standards. The number of visitors to the city plunged 24% in April from a year earlier after a 30% decline in March.
Secretary for Social Affairs and Culture Ao Ieong U, during a media briefing Sunday, called on residents to stay at home. The government also urged residents not to panic buy and said there would be adequate supplies of food and essential goods.
Authorities are still investigating the source of the infections after uncovering some of the cases during the lockdown of a building where residents were tested. Those who tested positive include a cluster of workers employed from outside of Macau, and their colleagues and employers. Another cluster involves a person working at a prison and his relatives.
(Updates with details throughout.)
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