HONG KONG • Chinese gambling enclave Macau is suffering from deja vu.
Investors worry that a less vibrant VIP market heralds hard times, as it did in 2011. Shares in SJM, Wynn Macau and Galaxy Entertainment have fallen by as much as a fifth this month after the gambling enclave's largest junket operator, Suncity, warned of a tepid outlook for well-heeled patrons. But this time could be different.
Growth at the higher end is unquestionably slowing. Gaming revenue from VIPs rose by 13.5 per cent in the second quarter, compared with a peak of 34 per cent last year.
Part of that is due to competition: New casinos targeting wealthy Chinese have opened across South-east Asia, and the junkets - middlemen who organise and fund glitzier gambling escapades - are shifting more of their business into these lower tax jurisdictions, where they can earn fatter commissions.
With their help, upstarts in Cambodia and the Philippines raked in at least US$1.4 billion (S$1.9 billion) from VIPs last year - equivalent to roughly 7 per cent of Macau's revenue from high rollers the same year.
Deutsche Bank analyst Karen Tang argues that weaker Macanese VIP spending portends a weaker mass market, too, as it did in 2011.
Analytical caution is warranted. Chinese President Xi Jinping's corruption crackdown halved VIP spending in Macau in 2016, and that low base flattered last year's growth figures. So 2017, in turn, set a very high bar for comparison this year, making it harder to divine broader trends.
Regardless, Macanese operators have hedged dependence on the wealthy, refocusing on humbler players, who are less likely to follow the junkets into South-east Asia.
They are also diversifying, as evidenced by the jumble of theme parks and conference halls under construction. Where VIPs once accounted for almost three-quarters of Macau's gross gaming revenue, today that figure is closer to half, and less than a quarter of the bottom line, according to Breakingviews estimates.
Which is not to say middle-class punters are immune to economic stress. The weaker yuan could prompt Beijing to crack down further on capital outflows, for example, which would really sting.
More foreboding forecasts could cause these volatile shares to fall further. But that does not mean history is repeating.