Hedging costs on Sands China hit record

Concern that Macau gaming growth will slow sent the cost of options protecting against losses on Sands China to the highest level ever.

Puts hedging against a 10 per cent decline in Sands China shares cost 1.78 points more than calls betting on a 10 per cent advance, data showed. The price difference rose to 2.65 on December 2, the highest since the contracts started in June 2012.

Shares of Sands China, a unit of billionaire Sheldon Adelson's Las Vegas gaming firm, rose to a record HK$62.90 on December 9.

Spending on gaming in Macau would rise 13 to 16 per cent this month from a year earlier, said UOB Kay Hian analyst Victor Yip. That compares with gains of 21 per cent in November and 20 per cent in December 2012.

The five biggest increases on the MSCI Hong Kong Index this year were casino operators, with Sands China's 81 per cent surge pushing valuations to a three-year high.

"A lot of people are expecting the December gaming growth to decelerate," Yip said. "It's time for people to take some profits or switch to other sectors as valuations are getting pricey, and they're offloading either by selling the actual shares or by purchasing some put options."

Gambling revenue in Macau rose 19 per cent in the first 11 months of the year to 327.3 billion patacas after casinos raked in US$38 billion in 2012.