What happened
As if the casino industry hasn't been dealing with enough from COVID, including the delta variant, casino operators in the Chinese gambling mecca of Macao might have to face new regulatory headwinds. The stocks of casino owners in Macao dropped yesterday on the news, and more color on the issue has them tanking again today. Shares of Wynn Resorts (WYNN 4.15%), which has two properties in Macao, were down more than 10% Wednesday morning, and remained down 8.2% as of 10:50 a.m. EDT.
So what
The slide began yesterday when Macao's secretary for economy and finance announced a 45-day examination period for the area's gambling industry. The official pointed to deficiencies in the industry's supervision, according to a Reuters report.
Image source: Getty Images.
Added scrutiny from Chinese officials has some analysts downgrading related names today. Officials are saying they simply want "sustained and healthy development." But references to additional nongambling options and other uncertainties have investors selling first, rather than waiting for actual details of any changes.
Now what
That nervousness is understandable. Wynn has only two properties in Macao, but they represented 46% of total operating revenue in the second quarter, which ended June 30. And this comes with concerns about how the continuing pandemic, and resurgence with the delta variant, will affect casinos in all locations.
It seems Chinese officials are trying to support local residents in Macao, and reduce the area's dependence on gambling by adding other offerings. It's impossible to know ahead of time how things in Macao might change, but that's one of the risks with stocks having assets in China. Long-term investors who have appropriate allocations in the sector should probably let things play out, rather than react to the new uncertainty. But that decision comes down to personal risk tolerance, too.
