China's growing and prospering middle class continues to be an important sub-theme for investors in the region. Improving personal finances, high savings rates and strong economic growth have created the tailwinds of a major surge in shopper activity. Funds like the Global X China Consumer ETF (ARCA:CHIQ) have blossomed in the face of this mega trend. Aside from all the new TVs, Levis and fast food that this new middle class is consuming, entertainment spending is also rising rapidly in the nation. Perhaps none so quickly as in China's gambling mecca of Macau. The former Portuguese colony and current special administration region is seeing vast and expansive growth. For investors, it's not too late to bet on Macau and prosper. (For related reading, see Investing In China.)

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Larger Than Las Vegas
The island of Macau is located just 37 miles away from the financial hub of Hong Kong and is the only place in China where gambling is legal. This strict control and location has caused Macau to bloom as the place for entertainment in the nation. While mature U.S. gambling sites like Las Vegas and Atlantic City struggle in the wake of ongoing economic slowdown, Macau is still experiencing record revenues and growth. In 2010 gaming revenues for the island were four times larger than that of Las Vegas. This put Macau as the world's top casino market. Analysts estimate that its casinos will see 2011 gaming revenues of over $34 billion. This compares to Las Vegas' estimated 2011 revenues of only $6 billion. Overall, Macau's gross casino gaming revenues have been growing at a compound annual rate of 30% since 2004. (For related reading, see Going All-In: Comparing Investing And Gambling.)

Gaming aside, the Chinese government has encouraged the proliferation of non-gaming revenue on the island including entertainment, conventions and shopping. New hotels, shows and other entertainment options have continued to grow quite rapidly. Being developed as the "Orlando of China", neighboring Hengqin Island is being rebuilt as a family vacation destination to complement the casino resorts of adjacent Macau. Already many hotels in Macau offer combo vacation packages with neighboring Disney (NYSE:DIS) Hong Kong attractions. Total tourism revenues are expected to increase by over 45% during 2011.

Rolling Up to the Baccarat Table
For investors, the growth of Macau's entertainment and gambling is certainly enticing. While many casino and discretionary stocks have seen their share prices fall over the last few months as slowing global economic growth has taken effect, Macau's continued resiliency is a true sign of shifting wealth. Adding exposure to the theme could be a great long term play. The Market Vectors Gaming ETF (ARCA:BJK) tracks 56 different global firms associated with gambling. This includes casino operators like MGM Resorts (NYSE:MGM) as well as gaming equipment firms like Bally Technologies (NYSE:BYI). The ETF offers a broad play, not only on Macau, but Singapore and Malaysia's growing gambling empires, as well.

Casino operator Melco Crown Entertainment (Nasdaq:MPEL) offers a pure play on Macau's growth, as the company has zero exposure to mature markets like Las Vegas. The firm recently announced that it will pay $360 million for a controlling stake in a new gaming resort in Macau; the new 2,000-room resort should be finished by 2015. In addition, in late August Melco reported record EBITDA and gambling volumes for the second quarter. Similarly, Wynn Resorts (Nasdaq:WYNN) through its 73% ownership of Wynn Macau (OTCBB:WYNMF), offers a great play on one of Macau's first movers.

Macau has been moving towards more family entertainment, its casinos still cater to high rollers and that means high-end booze. While the drinking and gambling culture isn't as prevalent on the island as of yet, increasing international tourism is helping spur that adoption. Higher-ended booze makers like Pernod Ricard (OTCBB:PDRDY) and LVMH Moet Hennessy Louis Vuitton (OTCBB:LVMUY) could make ideal buys.

The Bottom Line
China's new-found wealth is transforming Macau into an entertainment mecca. Gambling revenues continue to increase and the region is seeing tremendous international tourist growth. For investors, the time could be right to bet on the island. The previous picks along with slot machine and electronic gaming specialist International Game Technology (NYSE:IGT) make great ways to play the growth. (For related reading, see Top 6 Factors That Drive Investment In China.)

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At the time of writing, Aaron Levitt did not own shares in any of the companies mentioned in this article.

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