Philippines – Philippine stocks plummet due to Chinese crackdownsBy Phil - 29 June 2015
Macau hasn’t been the only place hit by China’s crackdown on corruption and austerity with operators in Manila’s Entertainment City losing market value.
Melco Crown and Bloomberry Resorts have both been hit hard with JPMorgan Chase & Co. predicting that profits will fall across the Philippines by 56 per cent in 2016. Shares in Bloomberry, the operating force behind Solaire, have dipped by 27 per cent in 2015, whilst Melco Crown Philippines’s shares fell by 56 per cent. The more established Resorts World Manila, owned by Travellers International and Genting has suffered, falling by 35 per cent.
Noel Reyes, Chief Investment Officer at Security Bank, said in his analyst notes: “The chain reaction from Macau hit everyone. Expectations VIP players will come in large numbers didn’t happen. The stocks have fallen quite significantly but not everyone is rushing back in, and there’s no clear light at the end of the tunnel.”
Chinese visitation levels to the Philippines, the country’s fourth largest tourist sector, dropped by 33 per cent to 93,043 in the first quarter of 2015.
Revenues have been hit hard. Bloomberry made a first-quarter loss of 533m pesos (US$11.8m) due to the funding of Solaire’s expansion. Melco’s City of Dreams, which opened in December, reported a 3.09bn peso loss whilst Resorts World saw profit increase by 1.6 per cent to 1.74bn pesos.
Richard Laneda, an analyst at COL Financial Group, noted: “The first-quarter results raised the question; can there be aggressive growth without the numbers coming from China? The growth in earnings didn’t match the pace most wanted to see. The market isn’t overreacting, there’s genuine uncertainty.”
However, it’s not all doom and gloom.
Marc Reyes-Lao, an analyst at BPI Securities Corp. in Manila believes investors have ‘overreacted.’
“It’s partially because of negative sentiment towards the industry brought about by China’s campaign against corruption,” he said.
Bloomberg believes that profits across the three main casino resorts will increase by 47 per cent reaching 13.61bn pesos in 2016 and 15.59bn pesos in 2017.
Analysts at Sanford Bernstein team added: “In the near-term, the Philippines may also have some favourable regulatory environment which allows proxy betting, Internet interactive gambling, and low tax rate that enables casinos to offer competitive junket commissions. However, we do not expect such regulatory arbitrage for the purpose of luring Chinese VIP players to persist over the long-run.”