More Casino Losses Seen on Chinese Corruption Crackdown: Options
By Oliver Renick
When it comes to the prospects for casino companies operating in China, options traders are betting against a quick recovery.
One-month contracts to sell shares of Wynn Resorts Ltd. (WYNN) and Las Vegas Sands Corp. (LVS) cost the most since 2008 relative to bullish ones, data compiled by Bloomberg show. Bearish options on MGM Resorts International (MGM) are near their more expensive levels in almost six years, relative to calls. All three companies operate in Macau, China?s gambling center.
Each stock lost more than 25 percent in the past year as Chinese President Xi Jinping seeks to battle illicit money channeled through Macau?s casinos. The crackdown is scaring away high rollers. Gambling revenue in the former Portuguese enclave fell in 2014 for the first time, ending a decade of growth that transformed it into a betting center bigger than the Las Vegas Strip.
?Things are not going to rebound in 2015, it?s going to be a tough first half of the year,? Timothy Chen, an analyst at Rhino Trading Partners LLC in New York, said by phone. ?Macau has been a conduit for money to leave the country. The landscape is changing and no one knows where this could go.?
Gambling revenue in Macau declined 2.6 percent last year, and Barclays Plc projected in a Jan. 16 note that sales will drop 8 percent in 2015. Macau is the only place in China where casinos are legal and is viewed as a conduit for officials and businessmen to bypass currency controls and send money out of the mainland to safer havens.
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