Casino & Gaming stocks have fallen this week as Chinese regulators proposed changes in the Macau gambling industry. With the 20-year-old gaming licenses up for renewal next year, regulators are reconsidering the number and duration of new licenses they will issue. Some of the other items under consideration are an increase from the present 10% minimum local ownership of casinos; the addition of government representatives on casino boards to supervise activities and prior approval for distribution of profits to shareholders. Many U.S. and Chinese\Hong Kong casino and gaming stocks were down during the week.
We have 169 domestic and international shorted stocks in the Casino & Gaming Sector with a total short interest of $9.81 billion and 5.77% Short Interest % Float (5.46% S3 SI % Float which includes the synthetic longs created by every short sale in the float number in the denominator). This is an increase from the amount of short selling we saw in early March of $9.7 billion and 4.61% SI % Float.
The largest shorts in the worldwide Casino & Gaming Sector are (over $50 million of short interest):
Overall, total short interest in the sector increased by +$619 million as casino stocks rallied in late August as a “re-open trade” play. Most of the $619 million increase was due to mark-to-market increases in short interest and there was $27 million of short covering to offset some of mark-to-market price increases. The most shorted stocks in the sector over the last month were Caesars Entertainment (CZR US) and MGM Mirage (MGM US) while Wynn Resorts (LVS US), Scientific Games Corp (SGMS US) and Las Vegas Sands (LVS US) had the most short covering over the last month.
Casino & Gaming short sellers were up +$639 million in mark-to-market profits for the week, +6.35%, recouping almost half the mark-to-market losses they incurred in 2021. Casino & Gaming shorts are up +$468 million in September, +4.25%, but still down -$650 million, -6.5%, for the year.
The biggest winners and losers for the week were:
Casino stocks with less exposure to Hong Kong\China performed better this week creating a “regional pairs trade” in the sector by going long Las Vegas & online gaming and shorting Macau. We can expect more short selling in the Casino & Gaming stocks as continued price weakness du to Chinese regulatory volatility lures more short sellers into the Macau short trade.
Looking at short selling trends over time provides insight into overall market sentiment as well as the strength of bearish conviction in individual equities. Our Blacklight SaaS platform and Black APP provides an up to date view of short selling and short covering on an equity, sector, index, or country-wide basis allowing investors\traders to better manage their existing long and short positions.
Research Note written by Ihor Dusaniwsky, Managing Director of Predictive Analytics, S3 Partners, LLC
For deeper insight into short side data and analysis contact me at Ihor.Dusaniwsky@S3Partners.com
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