J.P. Morgan has released a research note indicating that Macau's gaming demand weakness in September is consistent with the bank's expectations, and it maintains Galaxy Entertainment as its top sector pick with a target price of HK$45.

The bank estimates that Macau's gross gaming revenue (GGR) for the first 20 days of September reached MOP 12.2 billion, translating to a daily average of MOP 610 million. This implies that the daily average for the past week edged up 5% week-on-week to MOP 614 million, partly supported by a higher-than-normal win rate in the VIP segment.

However, the month-to-date daily average is 14% lower than August's MOP 706 million, which broadly matches historical seasonal patterns and suggests essentially flat year-on-year performance—slightly below the bank's forecast of low single-digit growth. Despite this, the bank believes the data does not reflect any material shift in underlying demand, with weakness remaining within expectations.

Additionally, J.P. Morgan advises investors to approach this year's Golden Week data with caution, given significant variations in holiday timing and base effects. The bank anticipates modest declines during Golden Week, with October gaming revenue projected to fall 2% to 4% year-on-year.

As a result, the bank contends that the key to stock selection is not whether data shows slight negative growth, but whether it indicates stable demand or further deterioration. A decline exceeding 5% could dampen market sentiment, while positive growth might trigger a short-term rebound.

The bank notes that the market's current focus is not on whether Macau gaming stocks are cheap, but on what factors could drive valuation upgrades. In the absence of catalysts from clear policy changes or demand improvements, the bank remains selective; its top pick in the sector is Galaxy Entertainment, followed by Wynn Macau (01128), Sands China (01928), MGM China (02282), Melco Resorts & Entertainment (US:MLCO), Melco International (00200), and SJM Holdings (00880).

Where to start

For investors seeking exposure, the bank emphasizes that stability in demand—rather than the magnitude of any single data point—should guide positioning decisions.

Why these picks matter

With limited near-term catalysts, the bank's ranked preferences reflect a defensive bias toward operators with stronger balance sheets and more resilient mass-market exposure.