With Ben Bernanke's announcement that the U.S. Federal Reserve
would engage in a new round of 'perpetual' quantitative easing, the
risk-on trade looks to be back on, which could mean even more
upside for Macao gaming stocks.
[caption id="attachment_68590" align="alignright" width="300"
caption="Las Vegas Sands and other Macao gaming stocks are looking
attractive"]
[/caption]
The past few weeks have treated Macao gaming stocks particularly
well. Last week's announcement from Beijing of a ¥1 trillion
($158 billion) stimulus package, and the European Central Bank's
decision to buy debt from peripheral European nations saw
institutional money pile back into riskier emerging market
equities.
In particular, stocks with exposure to the consumer
discretionary component of the Chinese economy were positively
affected; many of these equities had slipped over the past few
months as a result of fears over a potential Chinese hard
landing,
Because Macao gaming stocks are positively correlated with the
health of the Chinese high-end consumer, names like Melco Crown
Entertainment (
MPEL
,
quote
), Las Vegas Sands (
LVS
,
quote
), and Wynn Resorts (
WYNN
,
quote
) had all dropped significantly during the summer months.
Most of these stocks found their collective bottom toward the
end of July, and Macao gaming equities have since been on a tear.
Sands is up around 25% and Melco is up almost 40% in a little over
a month's time.
While these stocks have increased significantly over the past
few weeks, it might not be too late. Although a few weeks ago it
looked as if
stocks were due for a pullback
, these recent macro announcements from various governments around
the world look to propel emerging market stocks higher for the next
few weeks.
As for long-term investors, it's not a terrible idea to start a
position here. However if history is any guide, there will be
another opportunity to jump into these equities at cheaper prices.
With earnings for this quarter not likely to reflect this newest
round of macroeconomic news, these names could see a pullback
during the fall earnings season. At cheap valuations, certain
stocks with exposure to the Macao gaming sector
could be quite lucrative
.
Disclosure: Author and family are long LVS, MPEL, and
WYNN.
