The Chinese sharemarket has been described as a casino in recent weeks after a 30 per cent fall had investors, regulators and economists around the world scrambling.

There are concerns that the fallout from the crash will spill over into the Chinese economy, crimping discretionary spending as investors reel from their losses.

Logic says this could hit Australian companies with interests in the region such as Crown Resorts, which owns casinos in Macau through its Melco Crown venture and relies in no small part on gamblers from mainland China.

But what if logic is wrong? Tim Craighead, Hong Kong-based director of Asian research at Bloomberg Intelligence, thinks it just might be.

"Wouldn't it be ironic if the stock market fall actually brought Chinese gamblers to the real casino?" he asks.
He says that from August 2014 to June this year, Macau's casino revenue plunged 40 per cent. Over the same period, the Chinese sharemarket surged, rising around 133 per cent to its peak in June.

Now the heat has come out of the casino of the sharemarket, and with new casinos set to open in Macau, interest in that old form of punting might be on the rise again.

"At this point we now have a new resort in Macau, Galaxy Phase 2, we'll have another with Melco Crown's Studio City later this year, the first new resorts in years," Craighead says.
"If the one way bet in the stock market is gone, maybe they'll come to the baccarat table."

Wealthy individuals grow less extravagant

It's no sure thing of course, and Craighead concedes there are more important drivers of Macau's underlying health.
The recent crackdown on corruption has had a large impact on gaming revenues, serving to make wealthy individuals develop less extravagant, attention-drawing behaviour, he says.

"The smoking ban has had an impact on the last nine months in the mass-market business, not necessarily pushing people away from Macau, but it does have a direct impact on the amount of time you're at the baccarat table," he adds.

As well as the 10 minutes away from the table that smokers might lose an hour, Craighead also points to the psychological (or perhaps superstitious) effect of returning to the table and losing a seat or changing a croupier had on gaming behaviour.

Crown Resorts shares have fallen 15 per cent in the last 12 months but jumped 3.3 per cent on Tuesday as the market enjoyed a strong bounce. The stock was trading at $13.27 on Wednesday and investors will be hoping Craighead's casino-switch theory is right and the run can continue.

The Sydney Morning Herald