WEBVTT - WeWork Bust Shows Hazards of Love; China Chips War

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<v Speaker 1>Hello, and welcome to The Credit Edge, a weekly markets podcast.

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<v Speaker 1>My name is James Crumbie. I'm a senior editor at Bloomberg.

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<v Speaker 1>This week, we're very pleased to welcome back on the

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<v Speaker 1>show Rashmi Bassu, our senior distress debt reporter in New York.

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<v Speaker 1>How are you, Reshmi? Go ahead?

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<v Speaker 2>How are you dying?

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<v Speaker 1>Very well? Great to have you back on the show.

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<v Speaker 1>Also on the Credit Edge, this week, we're going to

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<v Speaker 1>be talking to Cecilia Chan at Bloomberg Intelligence in Hong

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<v Speaker 1>Kong about the Chips war and casinos in China. So

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<v Speaker 1>do stay with us. But first Rashmi Bassu with Bloomberg News.

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<v Speaker 1>Great to have you back on the Credit Edge. Let's

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<v Speaker 1>start with we work Fascinating Saga, a company that was

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<v Speaker 1>not that long ago valued at almost fifty billion dollars,

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<v Speaker 1>now bankrupt. It was the world's most valuable startup, with

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<v Speaker 1>a colorful founder who started the office rentals firm with

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<v Speaker 1>an essential amenity beer on tap. They grew very rapidly

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<v Speaker 1>and spent extravagantly. But essentially it's a real estate business

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<v Speaker 1>offering flexible workspaces and also on a mission to blur

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<v Speaker 1>the boundaries between work and social life. By twenty nineteen,

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<v Speaker 1>we Work had rebranded as we Co with a mission

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<v Speaker 1>of quote elevating the world's consciousness. But Rashbie, why did

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<v Speaker 1>they file for bankruptcy? What happened?

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<v Speaker 2>I think the business model had just really come under question.

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<v Speaker 2>I mean, the company hasn't turned a profit. It was

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<v Speaker 2>valued at these, as you said, very frothy valuations. But

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<v Speaker 2>the key is life changed after COVID and when you

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<v Speaker 2>have a lot of debt on the balance sheet and

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<v Speaker 2>people are not going into offices in these shared spaces,

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<v Speaker 2>it really created a lot of issues for the company.

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<v Speaker 1>But they did restructure their debt earlier this year. Why

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<v Speaker 1>did that not work?

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<v Speaker 2>It was still too much debt And you know, quite honestly,

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<v Speaker 2>like you know, if you look at their two the

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<v Speaker 2>second quarter results, you really see that so much of

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<v Speaker 2>their expense is tied to these leases.

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<v Speaker 1>So how much are they really a casualty of the pandemic?

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<v Speaker 1>I mean they really did boom in twenty nineteen, right

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<v Speaker 1>before the global economy shut down.

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<v Speaker 2>No, I think it's a combination of a balance sheet

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<v Speaker 2>issue and that they have way too much debt, but

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<v Speaker 2>also an issue of these kind of venture capitalists loving

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<v Speaker 2>a business concept versus actually understanding what the business meant.

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<v Speaker 1>But let's talk about the business. I mean, presumably it

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<v Speaker 1>does survive in some form. Most of us are back

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<v Speaker 1>in the office again. Flexibility is the key. Surely it's

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<v Speaker 1>a model that still works. I mean renting out office

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<v Speaker 1>space to people who want it, especially when you live

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<v Speaker 1>in a city like New York where you know most people,

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<v Speaker 1>you know, spaces at a premium, rents a high People

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<v Speaker 1>don't always have an extra room in their house to

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<v Speaker 1>work out of. So you know, you throw in some

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<v Speaker 1>free beer and everyone's happy. Why wouldn't it work? Just now,

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<v Speaker 1>you know, the.

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<v Speaker 2>Beer just wasn't enough. You know, during its court hearing,

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<v Speaker 2>the CEO did say that, you know, the company needs

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<v Speaker 2>to renegotiate these office leases with over four hundred landlords.

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<v Speaker 2>And this process started back, you know, in twenty twenty two.

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<v Speaker 2>So it's just we have to understand that a line

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<v Speaker 2>share of the company's revenue in the second quarter was

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<v Speaker 2>tied to these lease payments. I mean, basically, what I'm

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<v Speaker 2>trying to say is that the lease payments kind of

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<v Speaker 2>consumed a lot of these revenues.

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<v Speaker 1>So we're talking about them taking out leases on buildings

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<v Speaker 1>at this pretty height of the rent. You know, the

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<v Speaker 1>costs of those leases were very, very high. Then they

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<v Speaker 1>ran into the pandemic. They can't afford to service those leases,

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<v Speaker 1>is that right, So they filed bankruptcy to sort of

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<v Speaker 1>put a pin in those leases.

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<v Speaker 2>Yeah. I mean, you know, the reason why a company

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<v Speaker 2>files for bankruptcy, especially we see in the retail space,

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<v Speaker 2>is it allows you to reject leases. And what we're

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<v Speaker 2>going to see as a rejection of leases combined with

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<v Speaker 2>the company kind of begging landlords to give them confessions,

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<v Speaker 2>meaning to decrease those payments.

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<v Speaker 1>So you really do dig in very deeply to the

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<v Speaker 1>kind of the creditor mess that ensues any bankruptcy. There

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<v Speaker 1>is some big companies involved, soft bank, King Street Brigade.

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<v Speaker 1>They're all fighting over the scraps here. Will they recover anything?

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<v Speaker 2>They will, you know, Time Hotel, but we saw them

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<v Speaker 2>kind of take the equity and the reorganized company assuming

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<v Speaker 2>that it exits bankruptcy and Time Hotel like you know,

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<v Speaker 2>I've spoken to people involved in the situation who said,

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<v Speaker 2>this really is the success of rework is going to

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<v Speaker 2>depend on its negotiations from landlords.

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<v Speaker 1>Is there anything that we can spin sort of broader

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<v Speaker 1>than just rework or is it very specific to we

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<v Speaker 1>work in this case.

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<v Speaker 2>I think we're just seeing, you know, a lot of

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<v Speaker 2>disturbance happening to the commercial real estate market. And you know,

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<v Speaker 2>one way to look at it is the more and

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<v Speaker 2>more of these leaf's payments to landlords go down, they're

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<v Speaker 2>also going to start seeing their cash flow come down.

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<v Speaker 2>So does that mean they're going to default potentially?

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<v Speaker 1>So there are other companies in a similar situation.

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<v Speaker 2>Yeah, I mean, I think little landlords are really hurting

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<v Speaker 2>and just have not been quite able to salvage themselves

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<v Speaker 2>post COVID.

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<v Speaker 1>But the idea of this we work specifically the restructuring,

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<v Speaker 1>the bankruptcy all this, is that they do survive in

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<v Speaker 1>some form. What form do we think that they will

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<v Speaker 1>come out of this in?

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<v Speaker 2>Yes, a much much smaller business.

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<v Speaker 1>Okay, so the learnings here, the lessons don't expand too quickly,

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<v Speaker 1>manage your debt, properly, run the company in a bit

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<v Speaker 1>more of a measured and rational way.

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<v Speaker 2>Right, don't fall in love with the business concept. You

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<v Speaker 2>really just have to understand what you're doing. And I

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<v Speaker 2>think you know this is also maybe a warning to

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<v Speaker 2>lender is that maybe don't fall for these like sky

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<v Speaker 2>high valuations.

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<v Speaker 1>I mean, we've been looking a lot of the lower

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<v Speaker 1>quality companies that's called them like triple C rated through

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<v Speaker 1>this earning cycle, and they really are getting punished when

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<v Speaker 1>they miss earnings. You know, some of these bonds are

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<v Speaker 1>dropping ten cents on the open. There seems to be

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<v Speaker 1>a lot of fear out there as credit distress rises,

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<v Speaker 1>not just limited to we work, but across the board.

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<v Speaker 1>Would you say that that's the case.

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<v Speaker 2>Yeah, we're definitely seeing that more and more a company

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<v Speaker 2>for having a challenging time servicing their debt given this

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<v Speaker 2>very high interest great environment.

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<v Speaker 1>On those you know, companies that are the riskiest in credit,

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<v Speaker 1>the ones rated triple C we have seen yields almost

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<v Speaker 1>double over the last let's say eighteen months, So they

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<v Speaker 1>are having real trouble servicing that debt just as the

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<v Speaker 1>maturities start to come due.

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<v Speaker 2>Right right, We're seeing just so much pain in the

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<v Speaker 2>market right now. You know, it's been great for the advisors,

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<v Speaker 2>but maybe bad for the lenders.

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<v Speaker 1>Good for the lawyers too.

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<v Speaker 2>Absolutely so.

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<v Speaker 1>Before we talks of Cecilia Chen at Bloomberg, and as

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<v Speaker 1>I mentioned about China, what else is on your radar?

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<v Speaker 2>Reshme.

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<v Speaker 1>It's been a big year for bankruptcy and distress. Do

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<v Speaker 1>we expect that to continue through year end? What sectors

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<v Speaker 1>are under pressure? Where are you most focused right now?

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<v Speaker 2>Right now, I'm focused on the technology space, telecoms, et cetera,

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<v Speaker 2>because they were kind of built to survive a low

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<v Speaker 2>interest environment, and that's actually saying quite a bit, but

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<v Speaker 2>now we're really seeing them getting their earnings getting punctured

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<v Speaker 2>by this environment.

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<v Speaker 1>Technology that's really hot space for a lot of people,

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<v Speaker 1>but it's a particular area in distress.

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<v Speaker 2>You know, one company that we've been kind of focused

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<v Speaker 2>on is lumin Technologies, which announced a deal last week,

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<v Speaker 2>and there's a lot of going back and forth on,

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<v Speaker 2>you know, on whether or not the deal was a

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<v Speaker 2>little bit too aggressive. And you know, we're just very

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<v Speaker 2>focused on education tech companies as well, and obviously the telecoms,

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<v Speaker 2>especially the service providers.

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<v Speaker 1>To that space. I mean, these all sound like good

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<v Speaker 1>businesses to be in, but in these cases it's just

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<v Speaker 1>too much debt, not very well managed.

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<v Speaker 2>Too much debt. It's kind of the story for Attech.

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<v Speaker 2>It's just you know, when these lbls are leveraged, buy

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<v Speaker 2>out for Dawn. They were done at like sky high multiples,

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<v Speaker 2>and now we're kind of seeing the earnings of Toury

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<v Speaker 2>and not really match up with those valuations.

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<v Speaker 1>Great stuff, Reshmi Bassie with Bloomberg News in New York.

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<v Speaker 1>Thank you so much for joining us.

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<v Speaker 2>Hi, thank you so much. This was fun.

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<v Speaker 1>Read all of Reshmi's great distress debt scoops on the

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<v Speaker 1>Bloomberg terminal and of course at Bloomberg dot com. So

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<v Speaker 1>right now, we're delighted to welcome to the Credit Edge

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<v Speaker 1>Cecilia Chan, who covers technology, among other things, for Bloomberg

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<v Speaker 1>Intelligence in Hong Kong. How's it going, Cecilia, Yeah, I'm fine.

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<v Speaker 3>Thanks for inviting me.

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<v Speaker 1>Great to have you on the show. So you're looking

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<v Speaker 1>at the market for semiconductors or chips. They're increasingly in

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<v Speaker 1>focus as AI becomes the hot new thing for investors.

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<v Speaker 1>We talked to Rob Schiffman about that recently, a great conversation.

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<v Speaker 1>You can find it on our podcast website. But Cecilia,

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<v Speaker 1>chips have also become a huge geopolitical issue, with the

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<v Speaker 1>Biden administration stepping up efforts to keep advanced chips and

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<v Speaker 1>equipment out of China. We're talking about the essential components

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<v Speaker 1>of AI here, and they are also used in the

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<v Speaker 1>military and super computing applications. And I understand also the

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<v Speaker 1>Japan and Netherlands have also adopted similar measures. So there

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<v Speaker 1>seems to be kind of a tech cold war happening.

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<v Speaker 1>I just wanted to start with us. You know, basic question, Cecilia,

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<v Speaker 1>why is this happening now? Why don't these countries want

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<v Speaker 1>to supply chips to China?

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<v Speaker 3>Well, first of all, Asia actually is a very critical

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<v Speaker 3>region to the semi conductors industry because the region actually

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<v Speaker 3>as around like our semi five to eighty percent of

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<v Speaker 3>the production hub as a production hub for the global

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<v Speaker 3>chip manufacturing. And so for China it is especially like

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<v Speaker 3>it's a major market because it is home to manufactories

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<v Speaker 3>that make products using chips like the smartphones, cars, computers,

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<v Speaker 3>household electronics, et cetera. And so those are like both imported,

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<v Speaker 3>I mean exported around the world and also purchased by

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<v Speaker 3>these consumers in China. And so for for China itself,

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<v Speaker 3>it has been looking into boosting its own like domestic

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<v Speaker 3>semi conducted instruct industry because it wants to like target

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<v Speaker 3>for the self reliance and we know of it's reliance

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<v Speaker 3>in like the foreign semi conductive firms. But then for US, well,

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<v Speaker 3>it's more like a political reason that is trying to

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<v Speaker 3>restrict the export of those adventures to China for use

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<v Speaker 3>in ai military use and supercomputers and so, and also

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<v Speaker 3>on the export of those high end semiconductive manufacturing equipment

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<v Speaker 3>to the country. And so the purpose of that is

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<v Speaker 3>to stop Beijing from receiving those cutting edge US technology

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<v Speaker 3>to strengthen its military.

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<v Speaker 1>Okay, got it. So do we expect this conflict to

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<v Speaker 1>be resolved anytime soon? Do you expect it to get worse?

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<v Speaker 1>I mean, we're going into a huge election year for

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<v Speaker 1>the US. It's a massive political issue. So is there

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<v Speaker 1>a postentially a risk this situation gets worse?

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<v Speaker 2>Uh?

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<v Speaker 3>Probably, I think this will stay or I cannot talk

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<v Speaker 3>about the government on behalf of the government. But then yeah,

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<v Speaker 3>I think that this geopolitical tension would probably remain a

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<v Speaker 3>big headwind to the Asian chip makers our credit, even

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<v Speaker 3>though the risk so far is still actually manageable, especially

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<v Speaker 3>for those like Korean chip makers and the Taiwanese chip makers.

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<v Speaker 1>Okay, so just let's talk about China quickly. The reaction.

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<v Speaker 1>As you said, they've started producing more of their own

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<v Speaker 1>to become self sufficient. Are the chips that they're making

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<v Speaker 1>just as good as any other or they better? I

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<v Speaker 1>mean pretulay, they're also a bit cheaper than the US,

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<v Speaker 1>are they actually?

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<v Speaker 3>Like I guess I should say that like because under

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<v Speaker 3>the current restriction, China shouldn't be able to like produce

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<v Speaker 3>those advent ships, like those that are like fourteen nanometers

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<v Speaker 3>or below. But then in we saw that Huawei launched

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<v Speaker 3>its new mobile mid sixty Pro and that actually surprised

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<v Speaker 3>the market because it can connect to the next five

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<v Speaker 3>G networks, even though, like despite US mansions that aim

0:12:13.440 --> 0:12:17.520
<v Speaker 3>to cut Chinese type tech giants from this technology. And so,

0:12:17.559 --> 0:12:20.719
<v Speaker 3>according to tech Insights, the phone is actually powered by

0:12:20.760 --> 0:12:24.520
<v Speaker 3>a new advance chip that is domestically produced using an

0:12:24.559 --> 0:12:29.160
<v Speaker 3>advanced seven nanometer technology, and rumor is saying that it

0:12:29.360 --> 0:12:33.120
<v Speaker 3>is produced by SMIC, but it's just market speculation and so,

0:12:33.280 --> 0:12:35.320
<v Speaker 3>but I guess what is surprised to the market is

0:12:35.360 --> 0:12:38.320
<v Speaker 3>that people with think Chinese technology would stop at fourteen

0:12:38.360 --> 0:12:41.280
<v Speaker 3>nine meters after restriction, but it seems like China has

0:12:41.320 --> 0:12:44.000
<v Speaker 3>been able to stay around two to two point fine

0:12:44.040 --> 0:12:47.800
<v Speaker 3>modes behind the world's best chip companies.

0:12:47.679 --> 0:12:52.880
<v Speaker 1>So they're catching up. Seems like yes, interesting, interesting, So

0:12:52.920 --> 0:12:55.880
<v Speaker 1>maybe the US policy is backfiring. So you mentioned the

0:12:56.679 --> 0:13:00.320
<v Speaker 1>producer of the Hildwai chips. Is that a Chinese company?

0:13:00.360 --> 0:13:02.520
<v Speaker 3>Oh yeah, it's uh, it's called s M I C

0:13:02.880 --> 0:13:05.679
<v Speaker 3>or it's just a rumor thing that it produced, okay,

0:13:05.720 --> 0:13:09.720
<v Speaker 3>and so yeah.

0:13:08.080 --> 0:13:12.400
<v Speaker 1>And other the other chip makers also in different countries.

0:13:12.440 --> 0:13:15.199
<v Speaker 1>You mentioned Korea, Taiwan. Are they also affected by this ban?

0:13:16.240 --> 0:13:21.240
<v Speaker 3>Uh? Yeah, because from this band it actually also well uh,

0:13:21.360 --> 0:13:26.120
<v Speaker 3>it actually affected the Chinese flaps uh owned by those

0:13:26.200 --> 0:13:29.600
<v Speaker 3>Korean chip makers, and also the the Taiwanese chip makers

0:13:29.640 --> 0:13:32.640
<v Speaker 3>like s M I see uh sorry not s M

0:13:32.679 --> 0:13:34.959
<v Speaker 3>I S but like a Samsung s K Highnex and

0:13:35.000 --> 0:13:39.000
<v Speaker 3>tsmc U. But the good thing is like in this October, well,

0:13:39.160 --> 0:13:44.360
<v Speaker 3>since last October during the trips restriction, they have been

0:13:44.400 --> 0:13:48.160
<v Speaker 3>receiving an indefinite wafair from US to import the equipment

0:13:48.200 --> 0:13:51.640
<v Speaker 3>to their Chinese flaps and so, and then this year

0:13:51.800 --> 0:13:55.400
<v Speaker 3>they actually also received an indefinite wafair and so it

0:13:55.440 --> 0:13:59.240
<v Speaker 3>seems like the immediate risk to their Chinese flats has

0:13:59.320 --> 0:14:02.520
<v Speaker 3>been easy because previously people are worried about, oh, what

0:14:02.600 --> 0:14:05.480
<v Speaker 3>will happen if they don't get a waiverer then, because

0:14:05.480 --> 0:14:09.000
<v Speaker 3>they have spent so much money in those Chinese facts

0:14:09.080 --> 0:14:13.240
<v Speaker 3>and so it's going to definitely destroy the supply train chain.

0:14:13.720 --> 0:14:16.240
<v Speaker 3>But then since they are able to receive the wafer

0:14:16.400 --> 0:14:20.240
<v Speaker 3>and so I guess the market is slightly more relief.

0:14:20.320 --> 0:14:25.720
<v Speaker 3>And also like the k PAX spending in well, previously

0:14:25.760 --> 0:14:29.240
<v Speaker 3>people are forecasting maybe they will start spending k PAX

0:14:29.280 --> 0:14:34.040
<v Speaker 3>in like moving the production back to their own country.

0:14:34.120 --> 0:14:36.840
<v Speaker 3>But then now it seems like they will be able

0:14:36.880 --> 0:14:38.640
<v Speaker 3>to eat that in the short term.

0:14:38.680 --> 0:14:41.360
<v Speaker 1>So just so listen. As a clear some Korean chip

0:14:41.400 --> 0:14:44.120
<v Speaker 1>makers have received a waiver which allows them to receive

0:14:44.200 --> 0:14:46.360
<v Speaker 1>the US semi conductors.

0:14:46.400 --> 0:14:49.640
<v Speaker 3>Is that right? Uh? Yeah, they allow them to export

0:14:49.680 --> 0:14:51.280
<v Speaker 3>the Chinese I mean the.

0:14:52.240 --> 0:14:55.720
<v Speaker 1>Tech okay, okay, so even though their plants are based

0:14:55.760 --> 0:14:58.040
<v Speaker 1>in China, they're still able to use this technology.

0:14:58.440 --> 0:14:59.240
<v Speaker 3>Mm hm that's right.

0:14:59.640 --> 0:15:03.160
<v Speaker 1>Interesting thing, okay, So let's let's talk about the credit

0:15:03.240 --> 0:15:05.400
<v Speaker 1>aspects of this cecilia. You look at that very closely,

0:15:05.480 --> 0:15:07.160
<v Speaker 1>and then that's what some of our readers are very

0:15:07.160 --> 0:15:10.880
<v Speaker 1>interested in. Is there any relative value here? Are there

0:15:10.920 --> 0:15:12.800
<v Speaker 1>are there winners? And losers. Are there companies that do

0:15:12.880 --> 0:15:14.760
<v Speaker 1>well out of this and others that don't.

0:15:14.960 --> 0:15:19.720
<v Speaker 3>Yeah, like the Korean chip makers ki Hynix, So we'd

0:15:19.880 --> 0:15:23.320
<v Speaker 3>like we think the bonds could titan versus it US

0:15:23.400 --> 0:15:27.640
<v Speaker 3>my peer called Micron, because sk Hynix actually is the

0:15:27.760 --> 0:15:32.000
<v Speaker 3>leader in high bandwidth memory ships, and because there's the

0:15:32.120 --> 0:15:35.440
<v Speaker 3>robust demand in the generator AI and also we are

0:15:35.480 --> 0:15:38.520
<v Speaker 3>expecting there will be a recovery in the DRAM demand

0:15:38.840 --> 0:15:41.800
<v Speaker 3>starting from twenty twenty four, and so we expect the

0:15:41.840 --> 0:15:46.680
<v Speaker 3>dollar ponds could tighten against it's our closest a usper

0:15:47.120 --> 0:15:50.400
<v Speaker 3>and also retrearchful of the company even though it's an

0:15:50.440 --> 0:15:53.560
<v Speaker 3>active in twenty twenty three. But the focus we are

0:15:53.600 --> 0:15:56.080
<v Speaker 3>looking at will be on twenty twenty four, which we

0:15:56.840 --> 0:15:59.280
<v Speaker 3>expect there will be a turnaround in the memory ship

0:15:59.320 --> 0:16:02.560
<v Speaker 3>demand and so that will drive the free casual positive again.

0:16:03.000 --> 0:16:06.720
<v Speaker 3>And also, as I've mentioned before, the indefinite WAIFA that

0:16:07.080 --> 0:16:09.960
<v Speaker 3>they have received from the US actually removed the urgency

0:16:10.280 --> 0:16:13.600
<v Speaker 3>to move the capacity back to Korea from China, and

0:16:13.680 --> 0:16:17.440
<v Speaker 3>so we think that could also stringthen their free cultural generation.

0:16:18.240 --> 0:16:21.600
<v Speaker 1>So there's opportunity in the Korean chip makers and less

0:16:21.600 --> 0:16:24.880
<v Speaker 1>so in the Chinese that maybe are under more pressure.

0:16:25.760 --> 0:16:30.120
<v Speaker 3>Yeah, for the Chinese one, well only one has a

0:16:30.200 --> 0:16:32.200
<v Speaker 3>dollar bond which is called s m C, but it's

0:16:32.240 --> 0:16:35.800
<v Speaker 3>currently under the sansion and so I think right now,

0:16:35.920 --> 0:16:39.000
<v Speaker 3>even though the ratings is I would say it's quite

0:16:39.000 --> 0:16:42.560
<v Speaker 3>stable because as long as the the the restriction will

0:16:42.600 --> 0:16:49.120
<v Speaker 3>not affect their mature, not production, than their their their

0:16:49.120 --> 0:16:53.760
<v Speaker 3>market position and the technology leadership domestically could support its

0:16:54.000 --> 0:16:58.640
<v Speaker 3>troop will be minus ratings. But yeah, for the Born

0:16:58.720 --> 0:17:01.880
<v Speaker 3>to Titan, I think the chance could be a bit

0:17:02.760 --> 0:17:03.960
<v Speaker 3>slim for now.

0:17:04.720 --> 0:17:07.360
<v Speaker 1>Okay, okay, but it will be very interesting to see

0:17:07.400 --> 0:17:10.560
<v Speaker 1>this sm I see rumor about the railway chips as

0:17:10.600 --> 0:17:12.879
<v Speaker 1>she is confirmed, right, that would be very interesting development.

0:17:13.000 --> 0:17:15.760
<v Speaker 3>Yeah, definitely on one thing other.

0:17:15.680 --> 0:17:16.160
<v Speaker 2>Other than that.

0:17:16.400 --> 0:17:19.439
<v Speaker 1>I know you you look at a multitude of things, Cilia,

0:17:20.080 --> 0:17:23.280
<v Speaker 1>and one thing that has been catching my attention over

0:17:23.280 --> 0:17:26.679
<v Speaker 1>here in the US covering Asian credit is the casinos.

0:17:26.720 --> 0:17:28.280
<v Speaker 1>I know you look at those. I just kind of

0:17:28.280 --> 0:17:30.120
<v Speaker 1>wanted to wrap this up by asking you about that

0:17:30.200 --> 0:17:32.959
<v Speaker 1>industry because it is quite important for a lot of

0:17:33.160 --> 0:17:37.240
<v Speaker 1>high yield companies in the US dollar market. How is

0:17:37.280 --> 0:17:40.240
<v Speaker 1>that industry doing? Is Macau completely swamped with gamblers.

0:17:40.240 --> 0:17:40.400
<v Speaker 2>Now.

0:17:41.240 --> 0:17:45.320
<v Speaker 3>Ah, yeah, I actually went to Macau on last Saturday

0:17:45.359 --> 0:17:48.920
<v Speaker 3>with my family. And then well, I guess it depends

0:17:49.000 --> 0:17:51.960
<v Speaker 3>on which casino you are going to, like the US

0:17:52.080 --> 0:17:56.800
<v Speaker 3>based one like our sand China with Macau and also MGM,

0:17:57.280 --> 0:18:00.440
<v Speaker 3>the casino flower is actually quite attractive because I guess

0:18:00.720 --> 0:18:06.320
<v Speaker 3>many tourists actually will go to those those casinos, and

0:18:06.359 --> 0:18:09.840
<v Speaker 3>then for the local ones maybe a little bit they

0:18:10.000 --> 0:18:13.600
<v Speaker 3>well I guess they still need to catch up. But yeah,

0:18:13.640 --> 0:18:16.679
<v Speaker 3>but for the sector, we think despite you know, we

0:18:16.760 --> 0:18:19.440
<v Speaker 3>know that the China property market has been.

0:18:19.760 --> 0:18:21.800
<v Speaker 1>Yeah, a lot of pressure there, Yeah, a lot of pressure.

0:18:22.200 --> 0:18:25.720
<v Speaker 3>Well, many things happening in the Chinese property markay, I

0:18:25.720 --> 0:18:28.720
<v Speaker 3>guess I should say, yeah, And so I guess the

0:18:28.800 --> 0:18:33.600
<v Speaker 3>Macau casino sector it could be a safest spot to

0:18:33.680 --> 0:18:38.720
<v Speaker 3>look at, yeah, because we think that there's limited incremental

0:18:38.840 --> 0:18:42.760
<v Speaker 3>risk in the factor, especially like after the casinos, they

0:18:42.760 --> 0:18:47.480
<v Speaker 3>are able to renew the concession for other ten years.

0:18:47.640 --> 0:18:51.560
<v Speaker 3>And also we see that the mcau's growth gaming revenue

0:18:51.600 --> 0:18:54.840
<v Speaker 3>coming back, and so into twenty twenty four, we actually

0:18:54.920 --> 0:18:58.040
<v Speaker 3>are expecting another twenty two percent increase in the growth

0:18:58.080 --> 0:19:03.240
<v Speaker 3>gaming revenue despite there's like weakness in China economy, and

0:19:03.320 --> 0:19:07.480
<v Speaker 3>so we definitely think like for mcaucasin knows, yeah, it's

0:19:07.480 --> 0:19:10.720
<v Speaker 3>something to watch for in twenty twenty four. And then

0:19:10.880 --> 0:19:15.120
<v Speaker 3>for me in terms of like relative valuation, I think

0:19:15.640 --> 0:19:19.119
<v Speaker 3>the ones that are best as the US parent like

0:19:19.920 --> 0:19:24.439
<v Speaker 3>than China, and also MGM could be uh the bonds

0:19:24.440 --> 0:19:28.800
<v Speaker 3>could be tightening. The reason is because they for example,

0:19:28.840 --> 0:19:32.000
<v Speaker 3>for Fan China, they have I mean a positive outlook

0:19:32.280 --> 0:19:34.920
<v Speaker 3>and so there's a chance for the company to upgrade.

0:19:35.600 --> 0:19:38.040
<v Speaker 3>And then for MGM China, we see that they have

0:19:38.200 --> 0:19:40.560
<v Speaker 3>been like driving so much market share from the local

0:19:40.600 --> 0:19:44.000
<v Speaker 3>ones and the market shaking actually is also sustainable, and

0:19:44.040 --> 0:19:47.240
<v Speaker 3>so that could also tighten the dollar bonds.

0:19:47.520 --> 0:19:49.600
<v Speaker 1>And when you're walking the floor there in Macau and

0:19:49.600 --> 0:19:52.720
<v Speaker 1>the big casinos, we got to post sorry pre pandemic

0:19:52.880 --> 0:19:54.600
<v Speaker 1>levels of expending.

0:19:55.600 --> 0:19:55.719
<v Speaker 2>Uh.

0:19:55.960 --> 0:19:59.680
<v Speaker 3>I think for if you compared to twenty nineteen, probably

0:19:59.760 --> 0:20:05.080
<v Speaker 3>it's still not yet there. The reason is because first

0:20:05.119 --> 0:20:08.840
<v Speaker 3>of all, they have some stuff issue before, like there's

0:20:08.840 --> 0:20:10.960
<v Speaker 3>a shortage of stuff and so they need to fill

0:20:11.080 --> 0:20:15.120
<v Speaker 3>back in. And then also there are some casinos recorded

0:20:15.160 --> 0:20:19.439
<v Speaker 3>the statellite casinos they have been closing, and so that

0:20:19.560 --> 0:20:23.919
<v Speaker 3>also affects like it's not the supply wise, it's not

0:20:23.960 --> 0:20:26.600
<v Speaker 3>fully back to twenty nineteen. But then at the same time,

0:20:26.640 --> 0:20:30.080
<v Speaker 3>there are so many new casinos coming in twenty twenty

0:20:30.160 --> 0:20:31.919
<v Speaker 3>three and off to well we are now in the

0:20:32.000 --> 0:20:34.399
<v Speaker 3>end twenty twenty three and twenty twenty four, and so

0:20:34.600 --> 0:20:37.159
<v Speaker 3>it's definitely going to boost up the supply again. And

0:20:37.200 --> 0:20:40.320
<v Speaker 3>then also people coming in, like we can see that

0:20:40.560 --> 0:20:44.240
<v Speaker 3>tourists from China and even the Tier two city tstory

0:20:44.280 --> 0:20:48.240
<v Speaker 3>cities are tourists coming into Macau, and so that will

0:20:48.240 --> 0:20:50.720
<v Speaker 3>also boost up the visitation.

0:20:51.480 --> 0:20:53.880
<v Speaker 1>So Celia Cham with Bloomberg Intelligence in Hong Kong, thank

0:20:53.880 --> 0:20:54.920
<v Speaker 1>you so much for joining us.

0:20:55.520 --> 0:20:57.239
<v Speaker 3>Thank you James, thanks for inviting me.

0:20:57.400 --> 0:20:58.920
<v Speaker 1>We look forward to having you back on the show

0:20:59.000 --> 0:21:03.080
<v Speaker 1>very soon. And please listeners do check out Cecilia's great

0:21:03.440 --> 0:21:06.679
<v Speaker 1>analysis on the Bloomberg Terminal and we will catch up

0:21:06.800 --> 0:21:10.040
<v Speaker 1>very soon. And thanks again to Reshmi Basu with Bloomberg

0:21:10.080 --> 0:21:12.359
<v Speaker 1>News in New York. Read all of her scoops on

0:21:12.440 --> 0:21:15.679
<v Speaker 1>the Terminal and at Bloomberg dot com, and please do

0:21:15.760 --> 0:21:19.000
<v Speaker 1>subscribe wherever you get your podcasts. We're on Apple, Google

0:21:19.080 --> 0:21:21.960
<v Speaker 1>and Spotify. Give us a review, tell your friends, and

0:21:22.000 --> 0:21:25.080
<v Speaker 1>you can also email me directly at Jcromby eight at

0:21:25.080 --> 0:21:28.480
<v Speaker 1>Bloomberg dot net. That's j C R O M B

0:21:28.640 --> 0:21:30.920
<v Speaker 1>I E as in my surname and the number eight

0:21:31.160 --> 0:21:34.800
<v Speaker 1>at Bloomberg dot net. I'm James Crombie. It's been a

0:21:34.800 --> 0:21:37.320
<v Speaker 1>pleasure having you join us again next week on the

0:21:37.320 --> 0:21:38.840
<v Speaker 1>Credit Edge