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Coronavirus

Macao to close casinos for two weeks to fight coronavirus

Chief executive cites worker's confirmed infection as grounds for shutdown

HONG KONG -- Macao Chief Executive Ho Iat-seng has directed the city's casinos to shut for two weeks as the world's biggest gambling center steps up its fight against the Wuhan coronavirus.

"It is a difficult decision to make, but we have to do it, as our priority is the health and safety of Macao people," said Ho, wearing a surgical mask, during an extended news conference on Tuesday. As justification, he cited the finding that a casino worker had tested positive for the virus.

The city's 41 casinos generate the bulk of government revenue via gaming taxes and are collectively the biggest employer.

Casino stocks listed in Hong Kong, which had already taken losses in recent weeks, tumbled further after the announcement. Galaxy Entertainment Group closed 2.3% lower, while Sands China was off 2%.

Macao, one of the world's most densely populated places, now has 10 confirmed coronavirus cases.

The closure will be first since the city's casinos shut their doors for a day and a half during a devastating typhoon in September 2018.

Visitors from mainland China are the main customers of the casinos, but the inflow slowed to a trickle by the last days of the traditional Lunar New Year travel week as virus worries spread. Visitations fell 78.3% from last year's holiday, according to the Macao Government Tourism Office.

Gross gaming revenues for January as a whole slid 11.3% from a year earlier to 22.13 billion patacas ($2.77 billion).

The closure announcement by Ho, who took office in December, comes a day after Hong Kong shut down most remaining ferry services to Macao as part of its own measures against the coronavirus. Macao had already moved step by step to compel casinos to check the temperature of all customers, require staff to wear masks and, most recently, to ask all customers be masked.

The government has also urged the casino operators to provide housing for thousands of workers who ordinarily commute across the border to homes in mainland China. For its part, China has suspended outbound group tours and a program that expedites individual travel to Macao and Hong Kong.

In a note to clients on Friday, Fitch Ratings said the four Macao operators it tracks have a sufficient financial cushion to get through the crisis.

"Assuming the outbreak does not last more than two quarters, 2019-nCoV will mainly have a temporary cash flow impact on casino operators," Fitch said, referring to the virus by its scientific shorthand name.

Bernstein gaming analyst Vitaly Umansky, though, estimated that the two-week shutdown could cut gross gaming revenues for the first quarter by half compared with 2019, with lesser impact on the first half of the financial year.

"Whatever the details of the temporary shutdown are, Q1 is obviously going to show awful results," he said in a client note on Tuesday. "Forecasts for Q1 and 1H are mere guesses at this time."

Later on Tuesday, a government official said the shutdown would start from midnight and last 15 days. He said it would not include hotels and restaurants linked to the casinos.

Speaking to analysts on Jan. 29, Rob Goldstein, president and chief operating officer of the U.S. parent company of Sands China, which has the largest market share in Macao, acknowledged the virus would hit its bottom line.

"It would be foolhardy to think we can reduce costs enough to offset what is happening," he said. "There is no way to hide from the fact we employ tens of thousands of people in these markets. And it is an expensive business to operate. And in the same way operating leverage swings your direction when volumes are good, it swings again, too, at times like this."

In a research note last week about a possible shutdown, Nomura analyst Harry C. Curtis estimated that Sands and three other U.S.-listed operators would together have to bear $448 million in monthly fixed costs.

Goldstein, though, is already looking toward the end of the outbreak sometime later in the year.

"I am a big believer in pent-up demand," he said. "When it does resolve, Macao is going to be very, very, very busy because whether you know it or not, these folks like to gamble. And we have the biggest and best properties in Macao. They will come back in force."

Additional reporting by Nikkei staff writer Nikki Sun and Nikkei Markets staff writer Benny Kung.

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