Advertisement
U.S. markets open in 1 hour 13 minutes
  • S&P Futures

    5,307.25
    -1.00 (-0.02%)
     
  • Dow Futures

    40,155.00
    +11.00 (+0.03%)
     
  • Nasdaq Futures

    18,499.75
    -4.00 (-0.02%)
     
  • Russell 2000 Futures

    2,141.00
    +2.60 (+0.12%)
     
  • Crude Oil

    82.48
    +1.13 (+1.39%)
     
  • Gold

    2,235.00
    +22.30 (+1.01%)
     
  • Silver

    24.72
    -0.04 (-0.15%)
     
  • EUR/USD

    1.0792
    -0.0037 (-0.35%)
     
  • 10-Yr Bond

    4.1960
    0.0000 (0.00%)
     
  • Vix

    13.03
    +0.25 (+1.96%)
     
  • GBP/USD

    1.2621
    -0.0017 (-0.13%)
     
  • USD/JPY

    151.2990
    +0.0530 (+0.04%)
     
  • Bitcoin USD

    70,467.95
    +216.15 (+0.31%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,952.37
    +20.39 (+0.26%)
     
  • Nikkei 225

    40,168.07
    -594.66 (-1.46%)
     

Did China's Golden Week Give Casino ETF the Midas Touch?

The Chinese population has just resumed work after a Golden Week. In China, the Golden Week is a seven-day long holiday in the second half of the year starting from October 1. Of the seven days, first three days are paid leaves commemorating the National Day and the weekends before and after are re-organized to give employees in Chinese companies a prolonged leave. People are in a party mood during these seven days and splurge on leisure activities.

Along with several other leisure sectors, the casino industry also gets a boost. Notably, Macau – a Chinese territory – is one of the largest casino gaming destinations in the world. After a long run, Macau has started to lose its charm on credit crunch issues in mainland China, check on illegal money transfers especially in VIP gaming from mainland China to Macau, constraints on visas and last but not the least, a broad-based slowdown in China (read: Will Troubles in Macau Spoil Gaming ETF Investments?).

As a result, casino companies in Macau struggled this year and were in search of a real driver. A prolonged holiday period in China could have emerged as that catalyst, but a weak business backdrop and political tensions in Hong Kong kept the revelry muted during Golden Week.

A short-lived positivity came from the September sales of Macau that were reported during the Golden Week. Sales were in line with analysts’ expectation, though the year-over-year plunge was the steepest after 2009, per Bloomberg. September represented a decline for four months successively.

Total casino revenue dropped 12% to $3.2 billion in September. Political mayhem in Hong Kong might have caused disruptions in some casino activities as “usual joint Hong Kong-Macau trips” of several mainland Chinese people may have been postponed, per the analyst Grant Govertsen working for Union Gaming Group.

If this was not enough, the recent implementation of a smoking ban in mass gaming areas will likely keep business under pressure for months to come (read: Hong Kong ETFs in Focus on Huge Pro-Democracy Protests).

Despite these new hazards, the pure play on casino gaming – Market Vectors Gaming ETF (BJK) – added more than 2% on October 6, i.e. following the release of the sales numbers. Otherwise, at the start of the all-important Golden Week, BJK was up only 0.4% (as of October 5). However, investors should note that after a spike on October 6, BJK was down about 2% the next day (read: Sluggish Macau Market and Muted Earnings Hurt Gaming ETF).

Investors might want to gamble on the short-lived rise in the casino ETF, though we portend a choppy trend in the days ahead due to poor fundamentals and general choppy market conditions. Below we have highlighted BJK in detail for investors willing to take a gamble on this fund:

BJK in Focus

The fund looks to track the Market Vectors Global Gaming Index and provides investors direct exposure to the casino gaming market. The product has so far been overlooked by investors as is evident from its paltry volume of about 17,000 shares daily.

The fund has an AUM of $43 million which is invested in 47 holdings. The product is somewhat expensive as it charges 65 bps in fees per year which is on the higher end of the expense ratio prevailing in consumer discretionary ETF space.

Las Vegas Sands Corp, Melco Crown and Galaxy Entertainment are the top three stocks of the ETF. BJK has lost about 20% so far this year as it has been a difficult time for the industry, though it is undoubtedly looking for a bounce back in 2015.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Read the analyst report on BJK


Zacks Investment Research



Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Advertisement