Why casino stocks soared this week to beat the stock market

What happened

The actions of both Las Vegas Sands (LVS 15.06%) and Wynn Resorts (WYNN 13.17%) ended the week in the black, according to data from S&P Global Market Intelligence, while Entertainment Caesars (CZR 10.36%) wiped out most of a large deficit after Shanghai officials announced they would end weeks of strict lockdown and try to reopen in days.

Sands ended the week up 1.1% from its close last Friday after falling 12% at the start of the last trading day, while Wynn was essentially flat after falling a similar percentage.

Although Caesars still ended the week up 8%, it was down as much as 19% during the week, so it recovered almost as much ground as its peers.

Image source: Getty Images.

So what

China has treated its citizens harshly to contain further outbreaks of COVID-19, with Shanghai’s population of 25 million absolutely banned from leaving their homes, often not even allowing deliveries, leading to massive food shortages. Beijing has been subjected to similar forced closures.

This is having a ripple effect across many industries as global trade and supply chains have also been impacted by the shutdowns. According to Reuters, restaurants, shopping malls and entertainment and tourist venues have been closed, bus, metro and taxi services have been suspended and residents have been forced to stay in their buildings with COVID-19 tests. almost daily required.

Since the shutdowns began in late March, casino stocks are still down even after Friday’s rally, with Las Vegas Sands down 11%, Wynn down 17% and Caesars down 28%.

Now what

The reason casinos have fallen so hard is because mainland China is the biggest source of tourism for Macau, the only place in China where gambling is legal. Shanghai, Shenzhen, and Hong Kong are all major cities that contribute to Macau’s casino revenue. The closures have prevented visitors from coming to the casinos.

While easing lockdowns is a positive step, casino stocks are unlikely to see any upside initially, and possibly for some time to come, as gambling isn’t about to be the first thing that people who have run out of food and basic necessities will think about.

Comments are closed.