It was a pretty incredible week for gaming stocks with exposure to Macau. As you can see below, Wynn Resorts (NASDAQ:WYNN) jumped nearly 50%, while Las Vegas Sands (NYSE:LVS), Melco Crown (NASDAQ:MLCO), and MGM Resorts (NYSE:MGM) all posted gains that crushed the market.
This follows a year of terrible results for Macau's gaming operators, both on the stock market and at the casino. So, why the turnaround now?
Speculation is the name of the game
When stocks are plunging fast, the market can often look for a reason -- any reason -- that they're near bottom and about to make a big comeback. The last month's spike in gaming stocks came because China's liaison to Macau, Li Gang, said the government was considering ways to "support Macau's economy in all aspects."
Read broadly, that could mean visas to Macau will be easier to get from Mainland China, money will be able to flow to the gaming enclave, and even the VIP market may be allowed to open up again.
But the statement is also very vague. It could be read simply as, "We don't want Macau to collapse, so we'll try to help."
I think investors are grasping at straws when buying on statements like this, but right now, straws may be all they have to hold onto.
Macau isn't looking up yet
The actual gaming data shows none of the signs of improvement that stocks do. In fact, the region just finished the worst month since September 2010, with just $2.1 billion in gaming wins. Ironically, that was announced the same day stocks popped most.
The trend also shows that gaming is still in decline. So, there's no reprieve from the pressure gaming stocks have felt all year, at least from an operations standpoint. Investors may be reading too much into the comments coming from China and Macau today.
Time to get bullish?
I'm still bullish on the long-term future of Macau, but I think the recovery in Macau's stocks is based on speculation more than it is on fact. The data is still showing a struggling gaming market, and until that turns around, we may not have seen the bottom for gaming stocks. Long term, the future is bright, but short term, there could be more pain ahead for Macau's gaming operators.