Casino operator Crown Resorts Ltd (ASX: CWN) could finally be catching a break with the stock jumping to a more than two-week high on news that the Chinese government could move to support the Macau economy.
Shares in some of the world's leading gambling resorts with exposure to Macau surged in the US on Friday after a Chinese official made a vague comment on providing broad-based support for the territory to help it break out of a long slump due to the corruption crackdown.
Crown jumped 2.4% to $10.82 during lunch time trade in sympathy to the news as it is impacted through its 34% stake in NASDAQ-listed Melco Crown Entertainment, which owns a number of resorts in Macau, including the soon to be opened $4.5 billion Studio City Casino.
But it isn't only gaming stocks that have outperformed on the back of the China news. Shares of Chinese companies listed in the US also enjoyed one of their best jumps after the government lowered the deposit required for first home buyers in China to help kick start its sagging economy.
Macau has been badly hit by China's corruption crackdown as VIP gamblers avoided the territory on fears of being caught up in the dragnet.
Casino revenues fell again for the sixteenth consecutive month when the latest data showed a one third drop in gambling revenue in Macau when compared to the same time last year, according to the Australian Financial Review.
The dismal news comes less than a week after one of the region's largest junket operators Neptune Group warned that its future is in jeopardy unless there's a turnaround in the industry.
Macau has been a lead weight around the neck of Crown with its shares crashing around 30% since March as investors could not see light at the end of the tunnel for Macau.
In contrast, other gaming stocks with no exposure to Macau, like Echo Entertainment Group Ltd (ASX: EGP), have fared much better.
A stimulus package could just be the circuit breaker needed to turnaround the fortunes of Crown, although the Chinese official didn't outline any specific strategy to arrest the slump.
However, experts believe any support that Beijing provides will be aimed at general tourism and this means the everyday punter will become increasingly important to casinos, which have grown too dependent on high rollers.
As I mentioned before, Crown shares are cheap but until there are concrete signs that Macau has turned the corner, the stock is not for the faint hearted.
