Chips down for Macau as it bids to launch its own stock market

Five years ago, Macau was a shining light in Asia’s economic landscape. The self-styled Las Vegas of the East was going from strength to strength as the tourist destination that everyone wanted to visit, most notably, well-to-do visitors from neighbouring China.While luxury entertainment in Macau is world-class, the city has much more to offer than that. Macau was a Portuguese colony for 300 years, a heritage marked by a wonderful cultural hybridity that manifests itself in all aspects of life: However, that picture has been gradually changing, both culturally and financially. Macau’s leaders feel the time has come for the autonomous region to reinvent itself, and reduce its reliance on gaming and tourism. But is it really ready for its own stock exchange?

Changing times

Since 2016, gaming revenue has been steadily declining in Macau. Most worryingly, that decline seems to be accelerating, and in August 2019, the nation’s Gaming Inspection and Coordination Bureau reported a year on year drop of nine percent. In part, that’s due to a general slowdown in China – those wealthy business travellers with money to burn are just not around in the numbers they once were. Gross gaming revenue for Macau casino operators was $2.7 billion in September, up 0.6% from a year earlier, according to data from the Gaming Inspection & Coordination Bureau. That’s roughly in line with the median analyst estimate of a 1% rise. A Gross gaming revenue for Macau casino operators was $2.7 billion in September, up 0.6% from a year earlier, according to data Tuesday from the Gaming Inspection & Coordination Bureau. That’s roughly in line with the median analyst estimate of a 1% rise. Some analysts were expecting Macau’s casino business to strengthen in the second half of the year. But the outlook has darkened as Hong Kong protests have held back tourists visiting Macau. However, changing habits are taking their toll. Websites like online-casinos.com offer variety of trusted casino operators, so there’s less need to even go out, never mind get on a plane, to visit a casino.

A mini-Nasdaq

The director of Guangdong’s Financial Supervision and Administration Bureau is He Xiaojun. He says Macau aims to create its own Nasdaq-type exchange, traded in yuan. The idea is to attract growing tech businesses from Macau itself and the Greater Bay Area in general and provide a new platform on which they can raise funds and grow together. He added that the first step towards making the plan a reality would be to get approval from Chinese Central Government he was optimistic this could become a reality before the end of 2019.

Is there room for a new exchange?

While Macau’s innovative thinking is being generally applauded, there are those who question the practicality of the plan. Perhaps the biggest stumbling block Macau is likely to face is the fact that it is right next to Hong Kong, one of the biggest financial hubs in Asia. Take a glance down the HKEX and you will see no fewer than eight Macau companies listed, six of which are the main gambling operators. The exchange has been voted the best in the world six times in the past ten years. Arguably, you could not come up with a worse place to try to start a new exchange from scratch.

Obstacles to overcome

Trading in offshore yuan could also create problems for Macau’s new exchange. The total deposits held at the end of last month amount to just over MOP$50 million. To put that into context, if you exchanged it into US dollars, it would be enough to keep the HKEX afloat for about four hours. Macau would also have to construct a whole arsenal of securities regulations and legislation. Even with all that in place, there is no guarantee that IPOs would be tempted on board when Hong Kong is such an attractive alternative.

Macau is right to be exploring ways to diversify and reduce its reliance on tourism and casinos. However, it could be that launching a stock exchange would be the biggest gamble of them all.

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