Macao will stop issuing gambling licenses and limit the expansion of existing casinos, in a move economists said to address rising problems brought by the red-hot gaming-led economy.

The special administrative region's chief executive, Edmund Ho announced yesterday that no new licenses will be released in the near future and no land will be allocated for building new casinos.

The existing casinos will not be allowed to add slot machines or gaming tables until a review is completed, Ho told Legislative Assembly, the legislature.

"We've done some assessments and discussions. We have decided, in accordance with the central government's directives, to take these measures," Ho said.

He was referring to his meeting with President Hu Jintao last month, when Hu expressed his wish for Macao, the world's largest gaming hub in terms of revenue, to maintain a sustainable and sound growth.

Economists said the moves apparently aim to rein in the red-hot gaming industry, which grew by 50 percent annually since it opened up to foreign investors in 2002.

Last year, casinos in Macao raked in more than $10.3 billion in gaming revenue, beating Las Vegas for the second consecutive year.

A sizzling gaming sector helped shore up local economy and fatten government coffer, but also triggered a string of economic problems, said Billy Mak, associated professor of Hong Kong Baptist University.

Property and consumer prices in the half-million-population enclave have risen to multi-year highs, outstripping the salary growth in non-gaming sectors.

And a gaming boom also resulted in labor shortage in many other industries as locals swarmed to casinos for openings.

"It's good to have a strong economic driver, but it will be better if the economy could grow in a more balanced way," Mak said.

The gaming sector now contributed 80 percent of the city's income, despite the government's efforts to cut exposure to gaming by boosting tourism and exhibition industries in the past years.

Macao, the only place in China where gambling is legal, has issued three licenses and three sub-licenses, allowing six firms to own casinos. They are Galaxy Casino Company Ltd, Wynn Macau, Melco PBL Entertainment, Venetian Macau, Sociedade De Jogos de Macau (SJM) and MGM Grand Paradise Ltd.

Casino operators also hailed the policies, saying they will help safeguard market fundamentals.

"In general, we welcome the government's moves to regulate the gambling market," Hoffman Ma, executive director of Macau Success, told China Daily over the phone. The firm operated some casino businesses under a partnership with SJM.

Indeed, analysts have already voiced concerns on the over-expansion in the market.

Investment bank Credit Suisse said in a research report in March that the city's casino operators will face profit margin pressure amid heated competition, though it believed an increasing number of mainland punters will not make over-supply a big concern.

But Patrick Yiu, associate director at CASH Asset Management, held a different view.

He said: "The industry is now highly competitive and competition is biting into gaming firm's profits."

Therefore, it's good to cool it down somewhat, he said, adding that the moves could give a short-lived catalyst to gaming stocks in the coming few days.

(HK Edition 04/23/2008 page1)