The stock market has had a tough 2022 so far, and this week’s attempt to try and claw back some ground after last week’s big losses has been mixed at best. the Nasdaq Compound (NASDAQ INDEX: ^IXIC) held up reasonably well on Friday morning, posting a 24-point gain to 14,831 as of 11:45 a.m. ET even as other major stock indices fell. However, the Nasdaq is still down almost 9% from its recent highs.
The COVID-19 pandemic has had a dramatic impact on the global economy, and the casino industry has been particularly hard hit. Travel restrictions and other complications have made it difficult for gaming operations to operate at full capacity, and international destinations in particular have seen significant disruption. But on Friday, Nasdaq casino stocks Wynn Resorts (NASDAQ:WYNN) and Melco Resorts & Entertainment (NASDAQ: MLCO) rose sharply on news from the Macau Key Game Center. Let’s take a closer look at what’s happening in Asia and what it means for these two companies and the rest of the casino industry.
A regulatory victory
The main news about these two gambling actions concerns Macau’s long-awaited decision on casino operators’ concessions. After fears of a severe reduction in existing operations, what Macau did came as a pleasant surprise to many investors.
Macau’s final decision kept the number of casino operators allowed to operate there at six. This has worked just about perfectly for existing businesses in Macau like Melco and Wynn, as it will limit the threat of additional competition but not jeopardize their own ability to continue operating their current properties.
However, regulators have made a change that will not be as favorable for current licensees. The duration of concessions from the Macao government will be halved, offering a period of 10 years instead of 20 years. However, the news was still a relief, given that existing licenses held by current resort operators will expire in June.
It is not entirely clear how the renewal process will work and to what extent investors can rely on conditions remaining similar to those that have existed under the current licenses in place. Nevertheless, shareholders seem optimistic about the prospects for relatively little change in operations in Macau.
The big stock wins
Given the scale of the stock price movements at the companies affected by the news, it’s clear that investors were worried about a regulatory crackdown. Wynn, which does business globally, was up more than 7% at midday Friday. Melco, which is much more concentrated in Asia, saw a massive 17% increase. Beyond the Nasdaq, Las Vegas Sands (NYSE:LVS) also saw a healthy rise, with its stock soaring 13% by midday.
In the short term, however, Wynn, Melco and Sands will likely continue to come under some pressure. The rise in the number of COVID-19 cases in key areas has forced China to reimpose quite severe restrictions in order to keep the pandemic at bay. Although other parts of the world have been less strict about returning to the toughest measures since the start of the pandemic, player travel activity is nonetheless likely to suffer, especially for those who have to cross international borders. to travel to game destinations.
Even with the gains, casino stocks are still well below their levels of several years ago, and it will likely be some time before they can begin to regain all the lost ground. Nonetheless, the news from Macau is a welcome step on the road to recovery.
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