Could another Macau casino crackdown strangle revenue growth?

  • Macau authorities have indicated they will tighten gambling laws in the territory
  • Will stellar growth predictions for territory be stifled by measures?

Authorities in the Chinese territory of Macau have indicated that they are looking at existing gambling laws and could introduce new restrictions on junket operators, beginning in January next year, a move that could have a major impact on the recovery of the casino industry in Macau, and the revenues of operators such as Las Vegas Sands, Wynn Macau, MGM and Melco.

Fernando Chui has reportedly suggested that Macau is to scrutinize responsible gambling and anti money laundering practices by casinos operating in its territory.
Fernando Chui has reportedly suggested that Macau is to scrutinize responsible gambling and anti money laundering practices by casinos operating in its territory.

According to Bloomberg, the plans were set out by the Macau Chief Executive Fernando Chui in his yearly address, in which he outlined a wide-ranging regulatory agenda: “The government will review and strengthen the gaming rules,” he said.

“The government will also regulate junket operations, promote responsible gaming and boost the Macau casino industry’s competitiveness.”

Macau is the only territory in China where gambling is legal, and in recent years, the Chinese authorities have accused junket operators – who loan money to VIPs and attempt to secure their business – of being involved in money laundering.

The territory has also been forced to put a limit on daily ATM withdrawal limits made by China UnionPay cardholders and has fitted facial-recognition technology to its ATMs.

These measures were part of the wider attempt by Chinese authorities to clamp down on corruption and the outflow of currency from the mainland, but the crackdown caused the Macau gambling industry to enter a period of decline from which it is now in recovery.

Sales gains

The threat of further regulatory tightening has been present for some time, but has not prevented the recovery of the Macau gaming industry. Indeed, some stocks are predicted to double in value over the coming years.

Although there has been some attempt at diversification in the Macau economy, the casino business remains its mainstay and two weeks ago, the territory recorded its fifteenth consecutive month of sales gains. Melco Resorts and Entertainment has also recorded third quarter results that exceeded expectations, largely on the back of gains in Macau and the Philippines.

Following the announcement by the Macau authorities, shares in Las Vegas Sands still rose by 2, but Wynn Resorts fell by 1.1 percent, Melco suffered a drop of 2 percent and MGM Resorts, which is less exposed to Macau than the others, saw its stock price fall 0.6 percent.

But such regulatory pressure, and the dependence on Chinese gamblers, could explain why the likes of Melco are looking to expand their offering to all-round entertainment, such as theatre shows, concerts, sports and other attractions that do not attract the same government scrutiny.

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