Casino stocks are ripping higher after a vague promise from the Chinese government

macau

(Kin Cheung/AP)
A worker takes rest at the construction site of the Galaxy Macau casino resorts in Macau. The Asian gambling capital's winning streak is cooling after a decade of red hot growth that transformed the city from a neglected former Portuguese colonial outpost into the world's No. 1 casino market.

Casino stocks are ripping higher after the Chinese government made a vague promise about Macau.

Li Gang, China's liaison to the gambling haven, said the mainland will "support Macau's economy in all aspects," according to Teledifusao de Macau.

It's unclear exactly what that means, but Macau could use all the help it can get. For over a year the global gambling hub has seen monthly declines in gambling revenue of 30% to 50% from the same time a year before.

The drop is the result of a government clampdown on corruption that has Chinese officials tracking how citizens are using their debit cards in Macau, capping traffic to the island, and allowing fewer tables at new casinos than companies expected.

Since this problem comes from the Chinese government, clearly investors think the Chinese government has something of a solution.

Here's what a bunch of long-suffering casino stocks are doing after that news.

• Las Vegas Sands is up 9%

• MGM Entertainment is up 5%

• Melco Crown Entertainment is up 12%

• Wynn Resorts is up almost 20%

Wynn is seeing the greatest gains, in part, because it has been the biggest loser in Macau. It is less diversified than its peers, having only two properties — one in Las Vegas and one in Macau. Macau made up 77% of the company's revenue as recently as the end of last year.

Here's Wynn blasting off:

wynn stock chart

(Yahoo Finance)
Wynn absolutely going nuts.

That said, even with this 20% rally, Wynn is still down 58% for the year.

And again, it's unclear exactly what the Chinese government means by "support." President Xi has never wavered in the anti-corruption campaign, which has scared away Macau's high-rollers and small-time gamblers alike.

Plus a lot of damage has been done. In 2014 thieves stole $1.3 billion from one junket — a high-roller financing company — and the cash pool was hit again this year when $13 million was taken from a company operating out of the Wynn casino.

The junkets finance gambling by Chinese tourists, and help them bypass restrictions on how much money they can take out of the mainland, so the thefts are a liquidity zap to the system.

Earlier this week, Neptune, one of Macau's biggest junkets, released a dire report saying that it wasn't sure how long it would be able to take the pressure. In 2014, 16% of junkets to Macau closed down.

No matter what China's about to do, it's hard to bring all of that back.

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