Macau - gaming revenues keep falling; Will China turn on the visitor tap?
If things really collapsed in Macau, the mainland government will ride to the rescue and inject busloads of tourists to fill up the black jack tables, they say. Then the casino boom will be back on track.
This has been the line pushed by some brokers looking for value in battered-down Macau gaming names. But there are risks the house might not win this time - or at least not all of the houses.
Three weeks ago, on a recent visit to Macau I was surprised to see a large TV crew and truck from Guangdong TV. They were there to cover the visit of state leader Vice-President Xi Jinping. The hope was this photo opportunity would be used to announce the reversal recent rules restricting Guangdong residents to visiting Macau to once every three months.
Unfortunately this announcement was not forthcoming. Jinping merely suggested Macau should diversify its economy, a fair point with gaming revenues equal to roughly 60% of gross domestic product.
But news last week that gaming revenues in January fell 30% year on year to 7.2 billion patacas ($911 million) is likely to increase pressure for a policy relaxation.
The number is only marginally below the figures for September to December, but underlines that Macau's good days look to be over -- a victim of the credit crunch and rationed tourists.
Macau needs to return to growth, as its only halfway through its massive casino and resort building program that has pulled in the biggest names in the casino business from around the world.
Before the recent postponement of some new projects, 2009 had been projected to bring another 38% increase in gaming tables, according to Credit Suisse.
Already, there are signs there is not enough business to go round. On my recent visit, many casino tables were still busy, but a sizeable proportion, together with the one-armed bandits, was lying empty.
After making my way through my third or fourth vast casino hall, they all kind of blended into one: The plush carpets and reproduction chandeliers might vary slightly, but not the thousands of stone-faced gamblers from China.
But it's when you venture to the Cotai strip that questions on Macau grow more pronounced. Here the vast Venetian complex of Las Vegas Sands Corp. might also have its fair share of gamblers, but the shopping arcades full of international brands are doing little or no business.
Restaurants also are conspicuously empty, although the budget food court was doing a brisk trade.
The impressive Venetian was meant to represent a true resort-style casino for the family. The worry for these businesses is that mainland gamblers are still not interested in tagging on a shopping expedition to the gambling trip, or bringing a wife for a meal.
This must be a concern, with a similarly large development under construction opposite the Venetian. That project is mothballed for now, leaving a half-built eyesore, but at least not adding to the oversupply.
For casino operators, it's a matter of who can come through the downturn in one piece. What is the authority's end game -- grand design, or benign neglect?
The Guangdong government is now dealing with bigger, more pressing issues, such as busted factories and rising unemployment.
If you believe some of the conspiracy theories, China is happy to see not just a slowdown in Macau's casinos, but also a shake-up. One change could be political, with speculation that chief executive Edmund Ho may be replaced as disquiet grows over the economy.
If any casino operators do go bust, it's likely there will be plenty interested parties to step in. A news story said the Macau government would take over any casino that went into liquidation.
It is worth noting that since 'casino king' Stanley Ho's flagship SJM listed in Hong Kong last summer, its market value has halved, as the new mainland visitor policy took its toll. If the share price goes much lower, perhaps SJM might draw bids or a privatization offer.
One would expect neighboring Zhuhai province will be looking on with interest. If one really wanted to diversify Macau and turn it into a resort like destination similar to Las Vegas, merging with Zhuhai could make sense. It might share the same weather, but at least has a dozen or so top class golf courses.
This year, work on a 5 billion yuan ($4.3 billion) bridge linking Macau and Zhuhai to Hong Kong is to start, which should bolster the industry and Macau's long-term outlook.
But for now, it seems China is holding most of the cards. You might have expected there was going to be a catch, when Beijing invited the world's casino barons in to their home turf.