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Chinese credit growth to limit Macau recovery

Written by Ben Blaschke

Slower Chinese credit growth could limit the rate of Macau’s gaming recovery in 2017, according to Wells Fargo Securities.

Despite seeing year-on-year revenues rise for each of the past five months following two years of consecutive decline, Wells Fargo Senior Analyst Cameron McKnight believes the market remains unstable with conditions in China not yet as condusive to rapid recovery as in previous years.

“Further out, we are cautious and don’t expect a v-shaped recovery as in 2010 and 2013.

“We stressed the important leading relationship between Chinese credit growth and Macau revenue growth back in 2012/13. Significant credit growth was the driver of the 2010 and 2013 recoveries and led Macau by 12 months.

“Credit growth picked up again in Q1 2016 as China sought to stimulate its economy and avoid a hard landing. However, there is a significant difference versus 2013 – in this cycle, Chinese credit growth is less than a third of what it was during 2012/13.”