Casino stocks wobble amid US-North Korea tensions

  • East Asian gambling hub responsible for mega profits
  • Political tensions could be behind sudden stock fall

Casino stocks for some of the world’s leading operators took a significant hit this week, and analysts say the current political tensions between the United States and North Korea could be to blame.

Shares in casino stocks have been rattled by the US-North Korea tensions.
Shares in casino stocks have been rattled by the US-North Korea tensions.

Wynn Resorts, Las Vegas Sands and Melco Entertainment were among those hit by slumps of between 1% and 3% – despite recent gains attributed to blossoming Macau revenues.

Fears of escalating unrest in East Asia and in the US could have caused panic among investors and a loss of confidence in casino stocks.

Good year for shares in Macau casino brands

Prior to this week’s decline in stock prices, it has been an exceptional year for casino operators who have a foot in the door of the Macau market.

Operators like Australian firm Melco get much of their business from Macau and the Chinese mainland, thanks to a growing casino tourism industry.

In Macau, a number of international casino chains have established a presence and are performing well.

The Wynn Palace and the Sands Macau are among the Cotai Strip’s most popular venues. Both have benefitted from a growing VIP gambling market in the region, with VIP play making up 57% of total revenues. ‘Better than expected’ profits during the first half of 2017, bolstered by a consistent 12-month increase in Macau’s overall revenues, have seen share prices skyrocket for casinos with exposure to Macau.

International tension sparks stock market panic

Tensions between leaders in the United States and North Korea have escalated this week, with a fierce war of words between the two nations’ respective presidents.

This has created fears that armed conflict or other unrest could occur. North Korea is located in East Asia, with relatively close proximity to Chinese territory Macau. This political situation could curb tourism in the region, which will inevitably lead to profit decline.

This is likely to be why stocks have suddenly dipped. MGM and Wynn both reported a 3% fall in their unit prices, while Melco lost 2.2% of its share value.

Las Vegas Sands felt the effects less harshly, but Nasdaq reports a 1.07% fall for the casino brand. This short term dip is probably a reaction to the worrying rhetoric heard by world leaders this week, but figures show tourism remains strong for now, so those blossoming VIP revenues in Macau should help share prices climb back up again.

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