Moreover, after Macau casino shares plunged an average 47% this year, short interest in the stocks have piled on, exposing the down trade to a short-term squeeze on any positive news. A short squeeze occurs when investors with heavy short positions are forced to cover, or buy back, their shorts in the event of a sudden share appreciation – short sellers are essentially being squeezed out of their short positions at a loss. Consequently, the additional buying momentum from short sellers covering their options contracts help bolster share prices even further.
However, Macau’s casinos are still suffering from a dearth of high-rollers, who have shied away from making bets as the Chinese economy weakens, the markets experienced a correction and the government cracks down on corruption.
While the week-long holiday may boost tourism over the short-term, Macau still suffers from a large gambling revenue shortfall. Year-to-date, total visitor arrivals dipped 3.2% year-over-year, with total gambling revenue down 37%.
Moreover, according to FactSet, Hong Kong-listed companies are still trading at an average 15.4 times forward earnings, or a little below their five-year average of 16.5%, which suggests that the Macau-listed company shares are more or less close to fair value even after this year’s steep decline.
For more information on the gambling industry, visit our gaming category.
Max Chen contributed to this article.