Casino delays, Economy and early Elections

So Sands is to be delayed: it will now open in the second quarter of 2010 instead of the first. And there is speculation about a delay by Resorts World.

These delays albeit minor may have implications on the timing of GE and the growth of the tourism sector, a key driver of the economy.

CIMB in a recent report is very bullish on Singapore (but then which broker isn’t?).

An important reason are the casinos: “The two resorts are expected to produce economic multipliers, should tourist arrivals rise from 9m in 2009 to 12m-13m in 2010. Directly, the positives would filter down to other industries such as food & beverage, hotels and interior designers.”

So continued delays (even minor) and the BT report that “Las Vegas Sands (LVS), which is in the midst of applying for its casino licence for Marina Bay Sands (MBS), may not have the help of junket operators when it opens in April”, could be problems not only for the casinos but also for the economy.

For the record, Bank of America Merrill Lynch analyst Melvyn Boey estimates VIP clients will account for about 50% of the business at the Singapore casinos. But of these VIP clients, only about 30% might be expected to be brought in by junket operators with most being ‘in-house VIP clients’. Now 30% of 50% sounds a lot to me, though he says it is “insignificant”

(Some background on why junket operators may give Singapore a miss. The boss of Sands was quoted by BT, “First of all, I don’t think the junket reps (representatives) are going to apply for licences. There may be one or two – but the government has said they don’t want the Macau style junket reps that take a very large percentage of the gross income.”)

So all the more reason for a General Election in March (after the goodies in the Budget) rather than later in the year when conditions may not be so good (“Events, dear boy, events”). The government is believed to be planning an election in 2010 despite MM Lee’s well known reservations to calling an early general election (an election need not be called until sometime in early 2012).

Remember there was a lot of speculation when LHL became PM that an early election would be held? Speculation which only ended when MM said he saw no reason for an early election.

So the probability of an early GE in March is another reason to stay invested. Traditionally STI trends upwards when there is speculation of a general election.

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