Macao-related gambling shares dip on central govt clampdown
Updated: 2012-12-05 09:01
By Oswald Chen (HK Edition)
People walk past the illuminated Casino Lisboa in Macao. Macao-related gambling shares dropped on speculation that the nation's new leaders may take tough positions on corruption. Jerome Favre / Bloomberg
Macao-related gambling shares tumbled in Hong Kong on speculation that the central government may increase scrutiny of junket operators who provide credit to high-stake gamblers.
A Bloomberg report cited the Wall Street Journal as saying that police on the mainland and Macao have detained people from at least three of the biggest junket operators in recent weeks. By acting as middlemen, junket operators help drive the VIP business that accounts for about two-thirds of the casino revenues in the world's largest gambling hub.
SJM Holdings, founded by tycoon Stanley Ho, dropped 5.8 percent, the biggest drop since May 14. Galaxy Entertainment Group Ltd fell 4.5 percent and Sands China Ltd declined 4.4 percent. Wynn Macao also plunged 5.5 percent and MGM China tumbled 3 percent.
"There is speculation about the mainland's new leaders stepping up scrutiny over junkets, talks about anti-corruption measures and a clampdown on the mainland's underground banking system," said Lantis Li, a Hong Kong-based analyst at Capital Securities Corp. "All this speculation fueled unfavorable sentiment toward casino stocks."
"The Macao-related casino stocks will be volatile until official policy information regarding Macao gambling sector is clear," Tengard Fund Management Investment Manager Patrick Shum told China Daily. "Investors should remain on the sideline toward this share segment."
"The mainland government has requested to strengthen the governance of money flows," said Hoffman Ma, deputy chairman of Success Universe Group, which has a joint venture with Macao kingpin Stanley Ho's SJM Holdings to operate the Ponte 16 casino. "They don't want to take away from Macao, they want to control it more and alert people, telling them to behave."
Updated internal guidelines have been distributed to Macao's VIP or junket operators - a main conduit for siphoning money out of the mainland. The guidelines, circulated by the Macao Gaming Inspection and Coordination Bureau on Nov 8, require junket operators to report accurate monthly lists of players, including details of when plays were made and how much was won or lost.
As Beijing tightens oversight of civil servants and keeps an ever closer watch on flamboyant luxury spending, Macao is an obvious focus. The former Portuguese enclave is the only place in China where citizens can legally bet in casinos. A cash cow for local billionaires and US tycoons such as Wynn and Sheldon Adelson, Macao's annual revenue from gaming is expected to hit $38 billion this year - six times that of Las Vegas.
"Beijing doesn't want Macao's gaming revenue to grow at a faster rate than the mainland's gross domestic product (GDP) - currently growing at below 8 percent a year," said Tony Tong, director of strategic investment at Tak Chun Finance Group, an affiliate of one of Macao's biggest junket operators. Faster growth than GDP could be viewed as overheating, he said.
Macao's non-gaming revenues from areas such as dining and entertainment make up less than 5 percent of the total, compared to more than half in Las Vegas.
Reuters and Bloomberg contributed to this story
(HK Edition 12/05/2012 page2)