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Searching For a Bright Spot? Gold Isn't the Only Hope

|Includes:Las Vegas Sands Corp. (LVS), MGM, MPEL, WYNN
Is there any safe haven in these times other than gold? There aren't very many.

When the Dow plummets by 500 and 600 point daily increments... when the gold-plated U.S. credit rating is tarnished... and when European debt looks like a train wreck, where in the world can investors turn?

China?

The latest economic growth figures from China are starting to come in. And when all is said and done, we're going to be seeing another picture of world-beating expansion. A preview from the National Bureau of Statistics in Beijing indicates that economic growth will remain very strong.

The 9.6 percent economic growth rate in the first six months of the year is in line with the government's macro-economic target according to an NBS spokesman. Risks of a decline, he says, are "slight".

Investment in China continues growing at a fast pace. Consumption, the NBS says, will be further boosted by the growing incomes of urban and rural residents.

Where the Money Goes

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Does that sound too good and too easy to be true? The simple fact is that China has been expanding its wealth steadily since the beginning of its financial crisis. When China's performance statistics do miss the mark, they are usually an underestimate.

Despite China's strength, it is true even Chinese shares are not immune to global volatility. In the current market chaos Chinese ADRs have suffered their worst five-day slump since 2009. But the fact remains that China is the place where the real money can be found nowadays.

And there's one special place where China's money-flow is being pulled like a magnet.

China's Money Magnet

It's no surprise that Macau is trouncing Las Vegas in terms of gaming revenues. Vegas first fell behind in 2006 and Macau never looked back. Total revenues in the special Chinese Administrative Zone are now five times those on the Strip.

Gambling revenues are still growing at a stunning rate. Revenues for July are up a massive 48 percent from a year ago. Cash flow for the month was $3.01 billion.

Macau's Monthly Revenue Rise Since 2009

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The latest increases show a phenomenal wealth effect within China. Revenue from high-roller customers has jumped as much as 55 percent in recent months according to CLSA. The brokerage says it is not just a matter of increasing visits to the region. The boom is being driven by rising size of bets.

Shares of Macau's six casino companies leapt when that news was first released late last week. The biggest gainer was Galaxy Entertainment with a jump of 8.2 percent.

What about those stories that have been circulating lately about a hard landing for China's economy? Well, the whales on the Cotai Strip are showing no signs of financial distress.

Comparing Companies

Despite the bloodbath on world markets, Macau's casinos have by and large escaped the losses, and some showed profits on the worst day to date.

Galaxy Entertainment Group (HKG: 0027) was up while the Dow Jones shed 634 points.

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Las Vegas Sands (NYSE:LVS) was up in Hong Kong but lost heavily in New York trading.

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Wynn Resorts (NASDAQ:WYNN) took a similar beating in New York, but the Macau operations, Wynn Macau (HKG: 1128) (traded only in Hong Kong) bucked the trend.

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MGM Resorts International has a relatively small share of the Macau market at just 11 percent. Vegas-centered MGM shares took a steep plunge.

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Melco Crown Entertainment (NASDAQ:MPEL) was one of the biggest losers on U.S. exchanges but eked out a gain in Hong Kong (HKG: 200)

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And, the biggest player on the Macau scene is Stanley Ho's SJM Holdings. The casino giant trades only in Hong Kong (HKG: 880) and shares showed a gain for the day.

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It is certainly possible that even these shining stars will open on a down note after Wall Street's nosedive Monday. But the outlook for continued gains remains very positive.

RBS analyst Philip Tulk tells the Wall Street Journal he is raising estimate for Macau's 2011 gambling revenue by 6 percent to $34.1 billion, a 45 percent increase. Long range, Tulk is also raising his estimates for Macau's revenue growth for 2012 and 2013 by a similar amount.

At times like this cash is king. And right now the big money is still headed towards Macau.


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Stocks: LVS, WYNN, MPEL, MGM