Casino stocks fall as Macau tightens access
Casino stocks dropped in the U.S. after Macau laid plans to step up scrutiny of operators and increase local ownership, signaling tighter control over the world’s largest gambling hub amid Beijing’s efforts to clamp down on money laundering and currency outflows.
The government aims to increase “direct supervising” in gambling companies to better monitor their operations, Macau Secretary for Economy and Finance Lei Wai Nong said in a news briefing Tuesday, without elaborating how the proposed changes would be enacted. Officials also suggested raising the shareholdings of local directors in gambling companies from the currently required minimum of 10 percent, according to a public consultation paper on the proposal.
Authorities also proposed increasing scrutiny on so-called junkets that service high-rollers and extend credit to them, including raising entry barriers for junket operators as well as allowing background checks. The proposed changes could be made in a longgestating revision of the casino law, which will be passed ahead of Macau’s issuance of new gambling licenses to operators. Current gambling licenses expire in June 2022.
Wynn Resorts led a slump among gambling companies operating in Macau, sliding 11 percent for the biggest drop in the S&P 500 over concerns its casinos in Macau could face stricter oversight. Melco Resorts & Entertainment declined 6.2 percent and MGM Resorts International fell 3.9 percent.
China has been clamping down on activity by so-called VIP punters in Macau for several years now over concerns the high-stakes betting there — which takes place in convertible Hong Kong dollars — can sometimes be an illicit channel of currency outflow and money-laundering efforts. Beijing has also cracked down on organized gambling trips to Macau and other overseas destinations by junkets.
“The development of the gaming industry has evidently driven local economic and social development, but has also created some social problems,” said Lei.
The government’s proposal also includes reviewing the number of gambling licenses and their terms. The current licenses came with a 20-year effective period. Officials will consult the industry and public for 45 days before reaching a final bill to be tabled to the local legislature.
Macau, whose economy is almost entirely reliant on casinos, has been languishing during the pandemic as border curbs prevented its lifeblood of Chinese punters from entering the city. Gambling revenue for the month of August was 82 percent lower than the same month in 2019.