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What to Expect in 2019 in the Gambling Industry?
December 29, 2018 Petar Mitrovic
Global gambling market is dynamic and ever-changing and each year is different. Not to mention countries individually, all of which have sets of rules and regulations that shape the gaming industry. For instance, 2017 could be considered to be “a breakout year with everything going up” but 2018 was more for the conservative investors.
It is evident that we have entered a bear market, but that was expected. Now that it is here…
…it can be used to predict what the gambling industry could look like in 2019! Keep reading to find out what is expected to happen in the world’s largest markets such as Europe (UK), China and the United States.
The Status in Europe
Things are not looking bright in Europe. Everybody is still waiting for the United Kingdom to officially exit the European Union…
…triggering a liquidity crisis which is estimated to be much worse than the Greek crisis in 2010!
The EU and the European Central Bank will have several options regarding what to do with the currency but exiting at the right time could save the UK. They can watch the carnage from the sidelines which will not be an ideal situation, but it is much better than staying inside the Union.
How is this impacting gambling?
The UK will be great for the buyers on a no-deal Brexit. For example, 888 is severely battered in this environment but it could be a great purchase. On a post-Brexit mess, Rank Group will be appealing with almost no debt and gaining profit.
In the meantime, Paddy Power might be forced to write down its goodwill, making it a great snatch. And these are all bigger brands.
China’s Market
The Chinese market is complicated, but at the same time interesting to explore. Technically speaking, Macau has been in a bear market for almost 5 years now and there could be a bounce in the near future…
…but it will not go near the previous heights.
It is important to understand the economy of China in order to realize how this gambling market functions. The People’s Bank of China is doing the same thing as the Federal Reserve in the US, only with less restraint.
Since 2008, China’s money supply got up from CNY 40 trillion to CNY 181 trillion, but the dollar supply has expanded by only 93% in comparison.
Not to forget about the trade war between China and the US which is pointless and it is harming both economies…
…but stubborn leaders are keen on winning it! The numbers, despite all issues, could be extraordinary.
Now:
Having said that, Macau’s future depends mostly on VIPs. As the liquidity dries up, the VIP business will fade away and another 2008-typed collapse could be seen in Macau stocks. Of course, there is always a possibility to get the money from the central bank…
…but that would have TEMPORARY effects.
As for specific casinos and names, Wynn is nearing 100% leverage as its stock prices plummet. The other casino which is going towards the ditch is Las Vegas Sands. On the other hand, Galaxy Entertainment is quite strong.
United States
In the US, there are two ways in which 2019 could unfold. March money supply data can be strong in which case the stock downfall is expected near the end of the year.
On the other side, the March numbers could be weak and the bear market is then expected as early as April or May.
We will keep a close look at MGM and its February earnings release for signs of stress. If they are down, the March data will most likely come week. Until then, all we can do is wait. 2019 will be rough as interest rates and inflation are expected to rise…
…while the mood on Wall Street will be gloomy!
Source:
“2019, scary but full of opportunities”, Rafi Farber, calvinayre.com, December 26, 2018.
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