Shares of some casino industry powerhouses fell across the board on Thursday, many of which have ties to Macau, the world’s newest gambling Mecca. However, with tensions surrounding North Korea escalating, the hotspot’s close proximity to the tumultuous region might possibly hurt stock prices.
Lower travel numbers could spark trouble for U.S.-based companies that now operate in Macau. The area’s success has helped the gaming industry gain over 21% year-to-date, outpacing the S&P 500 by almost double, according to our Zacks Industry Rank data.
Shares of Melco Crown Entertainment (MLCO - Free Report) , which receives the majority of its revenue from Macau, fell 2.22% on Thursday. Las Vegas Sands (LVS - Free Report) also has a presence in the region, and the company’s stock price fell 1.07%.
Wynn Resorts, Limited (WYNN - Free Report) and MGM Resorts International (MGM - Free Report) , both of which own casinos in Asia’s gambling capital, sank by around 3%.
June travel to Macau rose 0.86% year-over-year according to an Oversea-Chinese Banking Corporation report. Mainland Chinese visitor rates to the gambling destination increased by 0.8%. But travel from nearby Hong Kong fell by 3.9%, and Taiwanese tourism dropped by 9.9%.
The report cited expensive transportation costs and pricey accommodation as possible reasons for June’s slowdown in tourism.
But it seems for now casinos can breathe easy if June numbers hold, as visitor rates weren’t down across the board. The number of overnight visitors to Macau grew for the 23rd month in a row.
Japanese tourism increased by 13.5% and South Korean numbers skyrocket by 42.2% according to the OCBC report. However, June was a long time ago in terms of the geopolitical climate. If the North Korea situation keeps getting worse, which seems like a strong possibility, travel to Macau could slow and in turn help bust some casino stocks.
Investors should keep a close eye on these numbers from Japan and South Korea, two U.S. allies that have a lot at stake in the current climate. If tensions continue to increase, fear could keep tourists at home.
One Simple Trading Idea
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
This proven stock-picking system is grounded on a single big idea that can be fortune shaping and life changing. You can apply it to your portfolio starting today. Learn more >>