Gambling Operator Stocks Plummet as Macau Announces 45-day Consultation Period Ahead of Industry Overhaul

Wednesday saw Macau casino operator stocks fall by as much as a third, losing approximately $14 billion in value, as the government began a regulatory revamp that may see its officials ramp up industry oversight in the world’s largest gambling market.

With Macau’s lucrative casino licenses up for rebidding next year, a government proposal to revise the city’s gaming law flustered a Hong Kong market already battered by a broad Beijing regulatory crackdown that has slashed asset values by hundreds of billions of dollars across sectors from technology to education and property.

Wynn Macau (1128.HK) was the first to plummet, falling by as much as 34% to a new low. This was then followed by Sands China (1928.HK) which fell by 28%. MGM China (2282.HK), Galaxy Entertainment (0027.HK), SJM (0880.HK), and Melco Entertainment (0200.HK) all suffered significant losses, resulting in a combined loss of around HK$109 billion ($14 billion).

Beijing, which is becoming increasingly concerned about Macau’s heavy reliance on gaming, has yet to say how the license rebidding process will be rated.

Some Hong Kong stock analysts wasted no time in reducing their outlook for casino operators in the Chinese special administrative region in the short run. All must reapply for licenses when their present ones expire in June 2022.

Analyst D.S. Kim of J.P. Morgan said the firm was lowering all Macau gaming names from overweight to neutral or underweight ahead of license renewals owing to increased scrutiny on capital management and everyday operations.

Kim stated that “We admit it’s merely a ‘directional’ signal,” adding that the news would have already placed a seed of uncertainty in investors’ minds.

Lei listed nine areas for comment during a news conference on Tuesday, including the amount of licenses to be granted, increased regulation, and ensuring employee welfare, as well as adding government representatives to oversee day-to-day operations at the casinos.

Additionally, the government proposes boosting Macau permanent residents’ voting interests in gambling concessionaires, as well as new limits on profit distribution and transfer.

In recent years, authorities in Macau have increased their supervision of casinos, focusing on illicit capital flows from mainland China as well as underground financing and illegal cash transfers. The territory went so far as to double the number of gaming inspectors and restructured many ministries to increase oversight in June of this year. Beijing has also ramped up its battle on cross-border gambling cash, impacting Macau’s junket operators and its VIP casino patrons’ financing channels.

He did warn, though, that “given the dismal investor sentiment, we will not be shocked if the market focuses primarily on the possibly negative consequences.”

The consultation comes as Macau has battled with a lack of visitors since the start of 2020 due to coronavirus restrictions. While gaming revenues have increased in recent months, they still fall short of the monthly totals for 2019.

Ciaran McEneaney

Ciaran has been working within the Gambling Industry as a deep analyst since 2019. His deep knowledge and understanding of all the gambling regulations, and processes makes him a true asset, and an always valuable point of view for Gambling Industry News, allowing us to cover every topics from a brand new perspective.