So much for Macau casinos quieting investor worries. September gross gaming revenue showed the smallest improvement in 25 months, third quarter figures underline decelerating high end growth, Golden Week was not shiny enough, share prices keep sliding, a tighter smoking ban looms, U.S.-China trade tensions keep thickening and mainland economic signals remain discouraging. And none of that really matters. Macau’s slowdown is real, and so are its extraordinarily favorable long term trends moving toward the most attractive business segment. (Yes, there is the specter of casino concession expiry; like earthquake risk in California, you accept it when you move there then ignore it.) Macau is marrying George Clooney, and investors are disappointed because it won’t date Donald Trump as much.

VIP revenue has been Macau’s bellwether, and investors ogle it. By government numbers, VIP revenue growth slowed from 20.5% in the first quarter to 17.2% in the second and 3.6% in the third. Share prices of the six Macau casino concessionaires – Galaxy Entertainment, Sands China, Melco Resorts, Wynn Macau, SJM Holdings and MGM China – have dropped nearly 30% this year.

Last month, Morgan Stanley Asia Managing Director Praveen Choudhary likened the situation to 2011/2012 when VIP revenue contracted severely while mass revenue remained strong. That scenario led to a 30% fall in share prices, followed by a 50% rise and then another 30% drop.

“Valuation multiples contract quickly without any earnings estimate revision,” Choudhary wrote of the first phase, which seemed completed or nearly so. “Then we see negative earnings revision, but by then, due to resilient mass, EBITDA growth surprises on the upside, resulting in significant stock recovery to the tune of 50%. Higher stock prices and lower earnings estimates drive the multiple higher. In the meantime, the overall slowdown catches up with EBITDA, and then we see one last correction before both EBITDA and multiple reach the bottom.”

But then Typhoon Mangkhut struck Macau over the weekend of September 15-16, leading to the first-ever government mandated casino closure, lasting 33 hours. Damage to casinos was minimal but travel disruptions and a suggested pause on group tours to facilitate storm cleanup battered revenue. September GGR of 22 billion patacas (MOP, US$2.75 billion) was the lowest total since the previous September. Year on year growth of 2.8% fell short of diminished expectations and was the smallest monthly rise since the current turnaround began with 1.1% growth in August 2016. For the third quarter, GGR grew 10.2% and 15.9% for the year to date.

Some analysts suggest year on year VIP revenue declined in September. Regardless, Union Gaming Asia Managing Director in Macau Grant Govertsen wrote, “[O]perators we have spoken with have confirmed that they have not yet seen any changes in customer behavior (e.g. trip frequency, wallet size), nor are they seeing any material issues or concerns with their junket partners.”

At first glance, the October 1-8 Golden Week for China’s national day seemingly shone. VIP revenue grew an estimated 10%, mass rose mid-to-upper teens and Chinese visitation increased in the low double-digits. Sanford Bernstein Senior Analyst Vitaly Umansky wrote that beyond more arrivals, increased visitor quality drove both mass and VIP growth.

However as the holiday period wrapped, Morgan Stanley became “less convinced” that there’s a share price rebound in the offing. The client note cited “flattish” visitation during the last two days of Golden Week, plus third quarter “EBITDA that in general will disappoint” and expected “meaningfully” downward consensus earnings revisions, a scenario for Macau stocks to underperform.

Adding to the gloom, Credit Suisse Research Analyst Cameron McKnight highlights slowing mainland China credit growth, a 12-to-15 month leading indicator of Macau GGR, with no major stimulus expected to counter the trend. Monetary tightening could even accelerate as the U.S. raises interest rates; the falling renminbi could lead China to follow suit. Overall, China’s GDP growth contracted to 6.5% in the third quarter, its slowest growth in a decade, with more dips likely.

Responding to the bad news, including mounting cuts in estimates and price targets, JPMorgan Regional Gaming and Lodging Analysts DS Kim and Sean Zhuang presented an “unlikely” worst case scenario for Macau GGR to fall by 1% next year, projecting mass growth of 4% and VIP revenue falling 7%. Both numbers are at least 10 percentage points below current trends, and the analysts consider them overly pessimistic. Yet even in that scenario, Macau casino industry EBITDA rises, albeit marginally. They also suggest downgrades may be driven by “stock underperformance rather than fundamentals.” In a similar vein, Howard Klein’s analysis of Las Vegas Sands on Seeking Alpha makes a cogent case for Macau’s underlying strengths.

Released last week, Macau’s official gaming revenue breakdown for the third quarter shows mass revenue grew 19.2% year on year and VIP grew 3.6%. The flip side of slowing VIP growth is that four in five patacas of incremental casino revenue come from the more profitable, less volatile mass segment built on mainland China’s reliably expanding middle class, instead of low margin, erratic VIP. Somebody explain why that’s a bad thing.