Casino ETF Could be a Gamble

Thanks in large part to improving data out of Macau, the world’s largest gambling hub, the VanEck Vectors Gaming ETF (NYSEArca: BJK) is up 14.6% year-to-date.

Some industry analysts see opportunity with Macau stocks. Macau, the only Chinese territory where gambling is legal, is the world’s largest gambling hub. The city is trying to rebuild its market with shops, restaurants, entertainment shows and other non-gaming attractions to bring in more middle-class tourism. For instance, Galaxy Macau is planning a Broadway.

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Junket operators, who account for two-thirds of betting in Macau, lend to Chinese players who are limited on how much money they can bring over from the mainland, and the operators collect gambling debt.

Conversely, other market observers believe caution is warranted with casino stocks.

“Macau’s September gross gaming numbers rose 7.4 percent from last year, a number that surpassed the 4 percent growth estimate and sent casino stocks soaring on Monday. But Chad Morganlander, portfolio manager at Stifel Nicolaus, sees the excitement over Macau’s numbers as short-lived,” reports CNBC.

Las Vegas Sands (NYSE: LVS) and Wynn Resorts (NASDAQ: WYNN) are dominant names in Las Vegas but the companies, two marquee holdings in BJK, are also big players in Macau, levering each to Chinese gambling trends.

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Since hitting record high growth in early 2014, Macau has steadily seen profits dwindle after the Chinese government began cracking down on corruption, which deterred many high-rollers. However, revenue numbers there rose in September.

“Macau’s gambling industry boomed this year as some of the world’s biggest gaming companies made some of their biggest long-term investments in the region. In August, Wynn Resorts opened the lavish Wynn Palace, which cost $4.1 billion to build, to complement its Wynn Macau mainstay, while Las Vegas Sands’ Parisian Macao hotel and casino opened its doors in mid-September. The companies’ focus on Macau helped turn the region’s gaming revenues around after more than two straight years of decline,” adds CNBC.

VanEck Vectors Gaming ETF

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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