In recent assessments, Fitch Ratings discussed the dynamics influencing the ratings of Macau’s concessionaires, highlighting both positive outlooks and lingering constraints. Despite the projected improvements in Macau’s economic landscape, Fitch remains cautious about the immediate prospects for further rating upgrades due to persistent leverage challenges among operators.
Macau’s Economic Outlook for 2024:
Fitch Ratings anticipates a promising year for Macau in 2024, forecasting a 15% surge in economic output alongside substantial debt reduction among key concessionaires. This optimism stems from several factors, including a steady recovery in inbound tourism, notably observed during the recent Chinese New Year festivities. Moreover, a notable shift in Chinese consumer preferences towards service-oriented sectors like domestic tourism and entertainment has contributed to shielding Macau from the broader economic slowdown in China.
Gaming Industry Prospects:
Fitch predicts a positive trajectory for Macau’s gaming industry in 2024, bolstered by the anticipated recovery in visitation and gaming revenue. This resurgence is expected to aid Fitch-rated casino operators in alleviating their debt burdens. However, despite these positive indicators, the agency remains cautious about the immediate potential for further rating upgrades. Elevated leverage metrics continue to pose challenges for operators, necessitating a longer timeline for deleveraging despite observed improvements.
Constraints and Challenges:
Despite the overall positive outlook, Fitch emphasizes the constraints faced by Macau’s concessionaires. High leverage metrics, particularly evident in SJM Holdings, underscore the challenges in achieving immediate rating upgrades. Fitch anticipates that SJM’s leverage will only reach acceptable thresholds by 2026, reflecting the prolonged nature of deleveraging efforts. Additionally, the potential impact of policies aimed at tightening capital outflow from mainland China could pose risks to Macau’s gaming revenue recovery.
Macau’s Economic Resilience:
Fitch reaffirms its positive stance on Macau’s economic resilience, as evidenced by its “AA” rating with a Stable Outlook. This rating reflects the SAR’s robust public and external finances, coupled with sustained economic and gaming recovery. Despite challenges, Macau’s ability to weather economic headwinds and maintain fiscal stability underscores its status as a resilient and dynamic economy in the region.
While positive indicators such as economic growth and debt reduction are anticipated, persistent leverage issues and external factors pose constraints on immediate rating upgrades for concessionaires. Nevertheless, Macau’s resilience and adaptability position it favorably for continued growth and stability in the coming year.