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China's clampdown on corruption and gambling Bringing Changes to Industry

Wednesday September 30,2015 :  CHINA'S GAMBLING CLAMPDOWN CHANGES THE ASIAN INDUSTRY
 
Analysts claim China remains important, but is no longer driving gambling growth in the region.
 
Macquarie analysts claim that China's clampdown on corruption and gambling is bringing about changes to the region's gambling industry in which China no longer drives gross gambling revenue growth; they predict that over the next two years the Chinese contribution to growth will be between 0 and just 3 percent.
 
That compares with growth in the region from non-Chinese sources of 11 to 13 percent over the same period.
 
The Macquarie Asia Gaming Framework report found that across Asia, the impact of VIP gambling is also waning whilst the mass gambler sector is gaining prominence and now dominates 49 percent of the market...a notable increase from the 36 percent recorded in 2011.
 
Australia and Malaysia are the major beneficiaries of these changes, the report claims, taking a more pessimistic view of the possibilities in Macau and South Korea which have become heavily dependent on Chinese punters.
 
Macquarie estimates that Asian GGR is set to decline by 8 percent between 2014 and 2017, with most of that decline having already occurred in 2015 in Macau, where an estimated US$14 billion in Chinese GGR has been wiped out and is unlikely to return soon.
 
The decline represents a major change from the heady days of CAG rates of 24 percent between 2009 and 2014, the bank observes.
 
Macau, growth next year is seen at 1 percent and another 5 percent in 2017, mostly driven by the mass market.
 
Australia is likely to see 10 percent growth over the period, while Malaysia is likely to be up 8 percent, thanks to increased tourism.
 
High growth of 13 percent is forecast for the Philippines driven by capacity expansion, but that is likely to squeeze margins.
 
The Macquarie Asia Gaming Framework report ends on a cautious note for the region, claiming there will be a 50 percent increase in capacity over the next two years across Asia, but warning that this will probably herald a significant deterioration in returns.
 
“While adding only 3-6 percent GGR growth and 1 percent EBITDA growth to Asia, the additional capacity will lead to significant returns deterioration in our view."



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