Entertainment and casino-related stocks surged on Monday after the government of Macau had lifted some of its border and travel restrictions, opening up the world's largest gambling hub to high-rolling gamblers from mainland China.
The reopening of the city sparked optimism with investors, most of which are expecting a continued recovery as China slowly eases its pandemic restrictions.
Casino stocks such as Melco Resorts & Entertainment had jumped by as much as 18 percent following the news of the city's reopening. Bloomberg's Intelligence Index for Macau casinos increased by around 12 percent in the US, while MGM Resort International's stock prices surged by as much as 6.8 percent in the US.
Stock prices of Galaxy Entertainment Group and Sands China both climbed up by around 4 percent in Hong Kong on Tuesday, contributing to the Hang Seng Index's gains during the day. Wynn Macau had its best day, with an increase in its stocks of around 16 percent. SJM Holdings also saw its prices surge by around 6 percent on the news of the reopening.
The surge came after China's Guangdong province announced on Monday that it would be lifting quarantine requirements for travelers to the gambling Mecca. This makes it much easier for gamblers from the mainland to cross the border. However, those coming from other parts of the world will still be subject to the city's 14-day quarantine.
Guangdong officials announced that the restrictions will be lifted starting on July 15. However, visitors will still need to undergo testing for the virus before they are permitted to enter the city. The lifting of the restrictions is good news for the city's casino industry, which saw gaming revenues plunge by more than 90 percent for three consecutive months as Macau shut down its borders to mitigate the spread of the disease. Morgan Stanley estimated that the industry was losing more than $15 million per day during the border shutdown.
Analysts at JPMorgan Chase expect gaming revenues to recover by about 20 to 35 percent in the coming months as more restrictions are lifted. While most people coming outside of the mainland may still find it hard to enter the city, Macau is expected to gradually lift restrictions as the pandemic is placed under tighter control.
Analysts also noted that pent-up demand for gambling and entertainment will likely result in a surge in revenues for casino and hotel operators in the coming months. This will particularly be evident once Macau lifts its restrictions for international travelers and visitors.
