The escalating tariff war between the US and China should have minimal impact on Macau due to the local gaming sector being primarily domestic focused with the majority of visitors coming from mainland China. However, there is a risk of secondary impact in the form of heightened geopolitical risk from worsened US-China relations or from higher costs of tariff-related goods having a ripple effect on more cost-conscious travellers and casino-goers, according to financial research firm CreditSights.
After US President Donald Trump last week raised the tariffs on goods imported from China to 145% while pausing additional tariffs on all other nations, CreditSights analysts Nicholas Chen and David Bussey noted that negative headlines in the wake of Trump’s “Liberation Day” announcement had already been seen to weigh on the sector via a widening of Macau bonds. These included Sands China’s IG-rated Sands US-dollar bonds and the higher-beta High Yield Macau credits.
“At this juncture, we think there is limited impact to the Macau gaming sector at the fundamental level as we still expect China’s 2025 GDP growth at 4.7% for now, after factoring in the tariff implications and trade uncertainties, though we also acknowledge that the downside risk to our 4.7% 2025 GDP forecast has increased due to a global growth slowdown,” the CreditSights analysts wrote in a Macau gaming overview published Friday.
“We also caution that the Macau bonds are likely to experience more bouts of tariff headline-driven volatility in the near-term, particularly those pertaining to China.”
Despite such concerns, CreditSights maintains a generally positive outlook for the Macau gaming sector in FY245 – forecasting higher topline profits thanks to moderate GGR growth and “steady operator-level market share and non-gaming contributions from facilities coming online in 2025.”
From an EBITDA standpoint, Sands China, MGM China and Melco are seen remaining steady with potential for improvement as the year progresses. Catalysts will be completion of Sands China’s Londoner renovations, the opening of revamped gaming space at MGM Macau and suites at MGM Cotai, and the return of Melco’s House of Dancing Water at City of Dreams.
CreditSights also expects the free cash flow (FCF) positions for Macau’s operators to remain positive in FY25, “albeit weaker for most due to higher guided capex, apart from Sands China which should see a stronger FCF from lower expected capex.
“Leverage and interest covers for most of the Macau credits are expected to improve on the back of better expected EBITDA coupled with total debt for most trending lower in FY25,” the analysts said.
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