Macau casino stocks facing a currency headwind

Neha Soni January 9, 2025

SiGMA news

Macau casino stocks facing a currency headwind

The Macau casino sector currently faces currency headwinds due to the depreciation of the Chinese yuan against the US dollar. This depreciation is starting to have profound effects on Macau’s tourism and gaming revenues.

A weakening yuan translates to increased cost of visiting Macau for mainland Chinese tourists, making it a less attractive destination. This is because Macau uses the Hong Kong dollar for gaming activities, which has a relatively fixed exchange rate against the US dollar.

The Chinese yuan, or Renminbi (RMB), has witnessed a steep decline in value against the US dollar in recent months. Multiple factors have contributed to this, including slowdown in China’s economic growth, which has led to reduced investor confidence.

Additionally, the US dollar has strengthened after the US Federal Reserve has raised interest rates. As the Fed hikes rates, the US dollar becomes more attractive to investors, which has further pressured the yuan. The recent surge of the US Dollar Index (USDX) to its highest level in two years has added more strain to the yuan’s position.

On the geopolitical front, tensions between the US and China, particularly around trade, under President-elect Donald Trump’s policies have also weighed in on yuan’s depreciation.

The People’s Bank of China (PBOC) has been working diligently to stabilise the yuan, including setting stronger daily reference rates to curb yuan’s slide. As currency traders bet on further depreciation, the yuan is expected to reach a 17-year low. The government will therefore have to balance the need for stability with the desire to keep the economy competitive in international trade.

Macau’s GGR

Macau’s gaming sector achieved MOP226.8 billion in gross gaming revenue (GGR) for 2024, reflecting a 23.9 percent year-on-year increase. This marked the second consecutive year of recovery following the reopening of Macau’s borders in January 2023. The figure represents 77.5 percent of pre-pandemic revenue levels in 2019, highlighting steady progress despite ongoing challenges.

Data from the Gaming Inspection and Coordination Bureau (DICJ), Macau’s gaming regulator, shows the year ended on a slightly subdued note, with December’s GGR at MOP18.2 billion (€2.2 billion), a 2 percent decline compared to the same month in 2023 and 1.3 percent lower than November. Analysts attribute this dip partly to the visit of China’s President Xi Jinping, which typically reduces visitation from the mainland.

During his visit last month, the Chinese President urged Macau, China’s Special Administrative Region (SAR), to diversify away from casinos. Xi emphasised the importance of fostering moderate economic diversification and prioritising the development of new industries with global competitiveness

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