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A Story Out Of China Has Casino Stocks Surging

Las Vegas Sands, MGM and Wynn all surged 4%-5% Tuesday on the news that China will wind down an anti-corruption drive within the ruling Communist Party.

China Daily reports that the campaign was meant to curb “misbehavior by party officials.”

“The campaign has reached its goals… but Party organisations at all levels must not let up on the drive to improve working practices and should continue to deal with the problems exposed by the campaign,” said a statement released Tuesday after a meeting of the Political Bureau of the CPC Central Committee.

What does that mean for casino stocks? It’s very simple — it means the party is back on in the high roller space. “Misbehavior” included spending money at VIP clubs and entertainment spots, like the lavish casinos of Macau.

The timing for this couldn’t be more perfect. Today Macau officials announced that the pleasure playground’s gambling revenue would decline 12%-13% from September of last year. Those are the worst number since the global financial crisis.

Indeed all of China’s economy is slowing down. August economic data showed a full-on routing, with the worst industrial production figures since 2008. Analysts started talking about the country missing its target 7.5% GDP growth rate.

That would be something we haven’t seen in a while.

Usually in a situation like this China might use government stimulus to get the economy back on track, but President Xi has showed signs that he wants to stay on the reform track, at least monetary policy-wise.

Corruption-wise perhaps we’re seeing another story.

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