An employee cleans a blackjack table inside the Galaxy Macao Phase 2 casino. [Photo/China Daily]

It has been a while since investors had reasons to buy Macao casino stocks.

A surprise move by the Macao government to ease mainland's traveling rules and the smaller-than-expected slump in June casino revenue have given hope that the industry might finally be due for a recovery. Casino stocks surged by a degree not seen in more than three years.

Sands China Ltd, Wynn Macao Ltd and MGM China Holdings Ltd soared as much as about 16 percent, the biggest intraday gain since October 2011. Galaxy Entertainment Group Ltd rose 13 percent and SJM Holdings Ltd 9.4 percent. The benchmark Hang Seng Index was up 0.8 percent.

The loosening of travel restrictions "marks the first supportive policy since a year ago", said Karen Tang, an analyst at Deutsche Bank AG. While she expects the impact will be small, "we note the change in policy tone as important". She raised Galaxy, MGM China, Sands China and Wynn Macao to hold from sell.

The Macao government announced on Tuesday a reversal of the transit visa policy exactly a year after the entry rules were tightened. Starting July 1, mainland passport holders transiting through Macao are allowed to stay in the city longer and visit more frequently.

The government is expected to issue more supportive policies in the second half for Macao's economy while keeping gaming revenue regulated, according to Chris Kwai and Haofei Chen, analysts at China International Capital Corp.

Las Vegas Sands Corp and Wynn Resorts Ltd, which rely on their Macao units for at least 60 percent of their revenue, rose for two days on the back of the eased visa restrictions. Melco Crown Entertainment's New York-listed shares ended up 4.2 percent, after surging 9.7 percent on Tuesday.

Gross gaming revenue in Macao fell 36.2 percent to 17.4 billion patacas ($2.2 billion) in June, beating the median estimate of a 38.3 percent drop from six analysts surveyed by Bloomberg. The slump has been easing for four straight months following 13 consecutive months of declines.

Optimism that the market is showing signs of bottoming may be misplaced, according to Morgan Stanley analyst Praveen Choudhary, pointing to disappointments for Macao casinos over the next six to 12 months "that should keep investors at bay".

These include the risk of VIP revenue decline further as more junket operators shut down, the impact on casino earnings due to higher labor and construction costs, he wrote in a note on Wednesday.