The stock market has had a tough 2022 so far, and this week's attempt to try to claw back some ground after big losses last week has been mixed at best. The Nasdaq Composite (^IXIC) held up reasonably well on Friday morning, posting a gain of 24 points to 14,831 as of 11:45 a.m. ET even as other major market indexes fell. However, the Nasdaq has still fallen close to 9% from its recent highs.
The COVID-19 pandemic has had a dramatic impact on the global economy, and the casino resort industry has been hit especially hard. Travel restrictions and other complications have made it tough for gambling operations to work at full capacity, and international destinations in particular have seen substantial disruptions. But on Friday, Nasdaq casino stocks Wynn Resorts (WYNN) and Melco Resorts & Entertainment (MLCO) moved sharply higher on news from the key gambling center of Macao. 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 resort industry.
A regulatory win
The primary news affecting these two gambling stocks involves Macao's long-awaited decision regarding casino operator concessions. After fears of strict curtailment of existing operations, what Macao did was a pleasant surprise for many investors.
Macao's final decision kept the number of casino operators allowed to operate there at six. That worked just about perfectly for existing companies in Macao like Melco and Wynn, because it will limit the threat of additional competition but not jeopardize their own ability to continue to run their current properties.
However, regulators did make one change that won't be as favorable for current license holders. The length of the concessions from the Macao government will get cut in half, providing a 10-year period rather than running for 20 years. However, the news was still a relief, given that the existing licenses that current resort operators hold will expire in June.
It's not entirely clear how the renewal process will work and to what extent investors can count on terms remaining similar to those that have existed under the current licenses in place. Nevertheless, shareholders seem optimistic about the prospects of relatively little change in operations in Macao.
Big stock wins
Given the size of the moves in stock prices in those companies affected by the news, it's clear that investors were worried about a regulatory crackdown. Wynn, which has operations around the world, rose more than 7% at midday on Friday. Melco, which is much more concentrated in Asia, saw a massive 17% rise. Beyond the Nasdaq, Las Vegas Sands (LVS) also enjoyed a healthy move higher, as its stock climbed 13% at midday.
In the near term, though, Wynn, Melco, and Sands are likely to continue to see some pressure. Rising COVID-19 case counts in key areas have forced China to reimpose fairly harsh restrictions in order to keep the pandemic at bay. Although other parts of the world have been less strict about reverting to the harshest measures from the beginning of the pandemic, travel activity among gamblers is nevertheless likely to suffer, especially for those who have to cross international boundaries in order to travel to gambling destinations.
Even with the gains, casino stocks are still far below their levels from several years ago, and it's likely to take a while before they can start to regain all of their lost ground. Nevertheless, the news from Macao is a welcome step on the road to recovery.