Players fleeing Macau on COVID-19 testing concerns: Credit Suisse

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The Gongbei border between Macau and Zhuhai.

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Strict travel restrictions and mass COVID-19 testing blitzes in Macau and Zhuhai will likely lead to a weaker Q3 than anticipated and a further downgrading of the sector, according to global investment bank Credit Suisse.

In a Tuesday note, Credit Suisse analysts Kenneth Feng and Lok Kan Chan pointed to local media reports of large numbers of visitors and cross-border employees leaving Macau at the Gongbei border gate on Tuesday afternoon.

Their departures were prompted by the announcement of mass COVID-19 testing blitzes by the governments of both jurisdictions in response to newly confirmed cases of the Delta variant, all linked to the recent outbreak in Nanjing. The new cases in Macau, a family of four, represent the SARs first community cases since February 2020 when Chief Executive Ho Iat Seng shuttered all casinos for 15 days.

With visitation to Macau already declining due to outbreaks across mainland China, Credit Suisse said players are now returning to China and dampening summer holiday demand.

From our on-the-ground checks, the players are currently in a rush to perform the COVID-19 test in order to return home, as there is a risk that Macau would become a medium risk area, the analysts wrote.

If that happens, players would need to be quarantined when they return home. Currently, mass traffic is already down to Junes level as China imposed travel restriction (or -25% from July). The premium mass hosts we talked to expect the traffic over the next one to two weeks will further fall to ~50% of July.

Given that the 1H of August is typically the high season for summer holidays and September would be a low season, with both China and Macau imposing certain level of restrictions, we expect 3Q21 will again be weaker than expectation and trigger another round of earnings downgrades.

The Nanjing outbreak has already spread to 15 provinces and 31 cities, prompting Beijing to classify four areas as high risk and 125 as medium. However, given that this is already the third outbreak this year, there is concern that full recovery from the pandemic may take much longer than expected.

The further virus spread to other regions within China would continue to limit visitation, Credit Suisse said. Also, a local outbreak in Macau may remain a near-term uncertainty to the sector.

Although the Macau/China border has already reopened for more than 10 months, GGR continues to track way below market expectation. With uncertain recovery path ahead and high streets expectation, we reiterate our cautious sector view.