More on China today
A couple interesting articles came out this morning that have me thinking about China again. I wrote a few weeks ago about Las Vegas Sands and the massive bet they're placing on Macau -- today an article entitled China's Big Import: Vegas goes into more detail in the Washington Post. Excellent picture of what's happening in Macau, and the speed with which it's growing, but also a couple concerns for the Macau gamers -- which for us US investors means Las Vegas Sands and Wynn Resorts.
First, the Chinese aren't used to long stays -- earnings for casino companies are dramatically cut back if they can't get visitors to stay for a few days in a nice hotel room, eat some fancy food, shop in the boutiques, and gamble more than they planned. According to this article, Chinese gamblers more typically visit Macau in day trips from Hong Kong or other coastal areas.
Second, while Macau already rivals Las Vegas in terms of gambling volume, and Las Vegas has itself been one of the fastest growing places in the world, the growth in Macau is ridiculous at this point. LVS is essentially building their own Las Vegas Strip all at once on the Cotai Strip, doubling the hotel room capacity of Macau in three years. That has some people very concerned that this enthusiasm for development in Macau is creating a bubble of capacity that can't possibly be met by the demand.
Even given these two concerns, I still think Macau gambling may well be a solid bet -- LVS particularly, though I haven't seen fit to add it to my portfolio since it seems so expensive. I did write about Las Vegas Sands a while back when I heard the CEO interviewed, and he definitely sounds like a man I'd like to run a casino with. Maybe a bout of bird flu in Macau will bring prices down to a level where I can justify buying. I'm also a little trepidatious about the asian gambling market bringing in more competition, as Singapore is mentioned as another site where they're considering building a gaming center and I'm sure many other governments are looking lustily at the cash flowing into Macau.
The rationale is summed up by an official from Wynn Resorts who said "There's a huge untapped market, we've just got to build a destination."
My only current Chinese stocks are Netease and Shanda, but I read a second article on China this morning that cheered me up a bit about the Chinese media and software business, and even made me think some more about investing in Microsoft.
I can't link to the article because I don't see it freely available online, but the Wall Street Journal (click here to try: Subscribe now to The Wall Street Journal and get up to 8 weeks FREE
) ran an article that said threee domestic computer manufacturers will be shipping their products with licensed copies of Windows (and soon, Vista) -- that may sound like basic news, and it may or may not have material impact on Microsoft in the near future, but in the long run this is great news.
Piracy in China is obviously one of the largest problems with that market -- that's why you see online gamers like NTES and SNDA taking the gaming market instead of Sony and Microsoft's Xbox, they're not willing to sell their products there for fear they would be immediately pirated. The same is true of many businesses, even many industrial companies are no doubt regretting manufacturing in China when they see copies of their products being produced and sold with impunity, especially in the local market.
It will be a long time before even a whip-cracking authoritarian government like China's can get intellectual property violations under control -- assuming that they genuinely want to, which is certainly open to debate. But the fact that some leading computer companies are now stepping up and making legitimate licensing deals with Microsoft stands out as a little beacon of hope for me. Definitely something to keep an eye on, if not reason enough to buy Microsoft (I've written before about being tempted by Mr. Softy, but dislike for the company in general has kept me on the sidelines).
First, the Chinese aren't used to long stays -- earnings for casino companies are dramatically cut back if they can't get visitors to stay for a few days in a nice hotel room, eat some fancy food, shop in the boutiques, and gamble more than they planned. According to this article, Chinese gamblers more typically visit Macau in day trips from Hong Kong or other coastal areas.
Second, while Macau already rivals Las Vegas in terms of gambling volume, and Las Vegas has itself been one of the fastest growing places in the world, the growth in Macau is ridiculous at this point. LVS is essentially building their own Las Vegas Strip all at once on the Cotai Strip, doubling the hotel room capacity of Macau in three years. That has some people very concerned that this enthusiasm for development in Macau is creating a bubble of capacity that can't possibly be met by the demand.
Even given these two concerns, I still think Macau gambling may well be a solid bet -- LVS particularly, though I haven't seen fit to add it to my portfolio since it seems so expensive. I did write about Las Vegas Sands a while back when I heard the CEO interviewed, and he definitely sounds like a man I'd like to run a casino with. Maybe a bout of bird flu in Macau will bring prices down to a level where I can justify buying. I'm also a little trepidatious about the asian gambling market bringing in more competition, as Singapore is mentioned as another site where they're considering building a gaming center and I'm sure many other governments are looking lustily at the cash flowing into Macau.
The rationale is summed up by an official from Wynn Resorts who said "There's a huge untapped market, we've just got to build a destination."
My only current Chinese stocks are Netease and Shanda, but I read a second article on China this morning that cheered me up a bit about the Chinese media and software business, and even made me think some more about investing in Microsoft.
I can't link to the article because I don't see it freely available online, but the Wall Street Journal (click here to try: Subscribe now to The Wall Street Journal and get up to 8 weeks FREE
Piracy in China is obviously one of the largest problems with that market -- that's why you see online gamers like NTES and SNDA taking the gaming market instead of Sony and Microsoft's Xbox, they're not willing to sell their products there for fear they would be immediately pirated. The same is true of many businesses, even many industrial companies are no doubt regretting manufacturing in China when they see copies of their products being produced and sold with impunity, especially in the local market.
It will be a long time before even a whip-cracking authoritarian government like China's can get intellectual property violations under control -- assuming that they genuinely want to, which is certainly open to debate. But the fact that some leading computer companies are now stepping up and making legitimate licensing deals with Microsoft stands out as a little beacon of hope for me. Definitely something to keep an eye on, if not reason enough to buy Microsoft (I've written before about being tempted by Mr. Softy, but dislike for the company in general has kept me on the sidelines).
Labels: LVS
This article posted by One Guy @ 4/06/2006 10:38:00 AM 0 comments
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