Hong Kong’s Hang Seng entered a bear market Tuesday after falling more than 20% from its closing high in January. The index fell 0.7% to end at 26422.55.

Tuesday’s Big Theme

Gambling stocks have slumped in recent weeks, thanks to worries about Chinese growth and spending by high-rolling VIP customers.

What’s Happening

Galaxy Entertainment Group and Sands China, which operate casinos in the Chinese territory of Macau, dropped 5.7% and 3.7%, respectively, on Tuesday. Shares of the two companies have declined by more than 15% so far in September, making them among the biggest decliners in the Hang Seng Index.

Their peers that aren’t in the benchmark index are also suffering. Hong Kong-listed shares of

Wynn Macau

MGM China Holdings and SJM Holdings fell Tuesday, and have also all fallen by more than 15% this month.

Gambling stocks have slumped around the world in recent weeks, fueled by concerns about a growth slowdown in China and the outlook for big spenders in Macau, many of whom come from mainland China.

Nomura analysts chalked up the latest declines to cautious comments from Suncity, Macau’s largest operator of junkets bringing in Chinese gamblers, about the outlook for VIP business in 2019.

Market Reaction

Tumbling stocks in China mean that consumers may be less willing to shell out for big purchases. In fact, recent data indicate that sales for big-ticket and luxury items in China have slowed, according to Tai Hui, chief market strategist for Asia at J.P. Morgan Asset Management. That includes gambling.

“You’re not talking about a couple of games of poker, you’re talking about a very serious amount of money involved,” he said.

Beijing’s broader crackdown on shadow banking and loans might not help either. “It may cool down their desire to try their luck in Macau,” he said, referring to Chinese consumers.

Still, the Nomura analysts believe the selloff in gambling stocks has gone too far, and suggest buying. Both Galaxy and Sands are trading at more than one-year lows and now look cheap, compared with their historical forward price-to-earnings ratios.


The Indian rupee was roughly flat on Tuesday, hovering at a record low against the dollar.

Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com

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