Special Report | 2008 – The Worst Year
There are those who, like Professor Hendrik Tieben, argue that “in Macau, the world financial crisis arrived with full force in November 2008, after the international stock value of casino corporations had already drastically decreased” but there are also those who understand that the impact was after all minimal.
In fact, there were a few more turbulent months, which began not in November but in September.
On the 22nd of that month, rumours surfaced on an online CTM forum about the possibility of three local banks going under.
Two days later, hundreds would overwhelm the stands of Luso Internacional and Weng Hang (the third bank was never identified) to claim their savings.
What prompted the rumours to gain credibility and generate such panic?
The explanation, if not total at least partial, is really silly: on the morning of the 24th several banks did not open their doors because of the effects of Typhoon Hagupit (Signal No. 8), which flooded a large part of the Inner Harbour, wreaking much damage across the city.
Many associated the rumour behind closed doors with thinking that the banks had failed.
None of this has been confirmed, as is well known, but it was enough, in less than 24 hours to drain about MOP1 billion (at least MOP600 million in Weng Hang and MOP300 million in Luso International Banking Ltd) from the banks’ coffers.
The rumours “have no basis,” Anselmo Teng, the former chairman of the Monetary Authority of Macau (AMCM) – who reiterated that the MSAR was “unaffected” by the global financial crisis – immediately responded.
Mr Teng’s confidence was based upon the fact that the territory’s banks had less than MOP200 million in assets linked to Lehman Brothers, which had filed bankruptcy the previous week. That is, only 0.05 per cent of total assets.
“The loss Macau incurred directly from the 2008-09 crisis amounted to MOP600 million due to the bankruptcy of Lehman Brothers, while Hong Kong people suffered much more from this event with several billion Hong Kong dollars senselessly lost,” Xinhua Gu, department head and Associate Professor of Economics at the University of Macau, explained to Macau Business. “This bank had sold some sorts of minibonds in Macau, Hong Kong, and other parts of Asia; those bonds were treated as illegal financial instruments in the U.S. As such, some Asian news reports said that those bonds were just financial opium, but local Asian governments, unlike their U.S. counterpart, had done nothing in prohibiting them from being sold on their financial markets.”
The “rumours have no basis” – Anselmo Teng (former chairman of AMCM)
At the same time, the former chairman of the AMCM called for “calm” from Macau depositors, announcing that his institution was investigating the origin of the rumour (a few weeks later a resident of Macau was detained, suspected of being the author).
“Despite the 2008 global financial crisis, the Macau banking sector fared well as banks in the MSAR had been adopting sound and prudent measures to manage their operations and activities,” AMCM told Macau Business.
Despite the best efforts of Anselmo Teng, the following weeks were marked by fear: in early October, former Secretary for the Economy and Finance, Francis Tam, said that the region might be affected by the United States’ financial crisis, and revised Macau’s 2008 growth forecast downwards to 10 per cent in 2008 (the Macau growth rate in 2007 was 27.3 per cent and 17 per cent in 2006).
The same month, it was the turn of Edmund Ho, the then Chief Executive, saying that Macau was unlikely to be immune from the international economic fallout although “at this moment, various large development projects are in their final stages, offering Macau conditions to rise to the occasion and move forward competitively in the tourist sector.”
“Three years after Macau’s old town received the UNESCO honour, the global financial crisis broke out, in October 2008. As many financial institutions in the US and elsewhere collapsed or ran into difficulties, and many economies around the world were affected, analysts [lined up] to predict that Macau’s economy would also enter a period of downturn because of a sudden contraction in the casino gambling business,” wrote UK researchers Victor Zheng and Po-san Wan in 2014, for whom “an atmosphere of anxiety pervaded Macau society.”
“However, around 16 months later, even as the US and European economies continued to struggle painfully, Macau’s gambling industry experienced an impressive rebound, as tourists returned and per capita expenditure rose. Macau’s labour market improved gradually, in parallel with the pick-up in the economy,” state the same authors.
By mid-2008, Macau’s gaming revenues had surpassed those of Las Vegas and Atlantic
City combined and the city had become the most profitable casino destination and lucrative gaming market in the world.
“On closer examination, within the year of 2008, Macau’s economy saw a sharp slowing down with growth rate sliding from 32.5% in the first quarter to 22.4% in the second and 10.4% in the third. Worse still has been the contraction of 7.6% in the last quarter in 2008, the worst performance since 1999, followed by an even more severe plunge of -12.9% in the first quarter of 2009,” according to Zhang Yang and Fung Kwan, both professors at University of Macau.
“Compared to neighbouring economies that were also battered by the outbreak and ramifications of global financial crisis Macau’s lack of resilience saw its GDP plummet more dramatically than that of Hong Kong, Mainland China, Singapore and Taiwan towards the beginning of 2009,” they both state in Macau’s Economy in the Financial Crisis (2009).
The global financial crisis also began to affect the employment conditions of Macau. The unemployment rate and the underemployment rate for September – November 2008 in Macau was 3.3 per cent and 1.6 per cent, respectively, up 0.2 and 0.1 percentage points over the previous period (August – October 2008).