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Billions blown as Macau casino investors fold amid gambling review

Billions blown as Macau casino investors fold amid gambling review

9/15/2021 11:55:00 AM

Billions blown as Macau casino investors fold amid gambling review

Macau casino operator stocks plummeted by as much as a third on Wednesday, losing around $14 billion in value, as the government kicked off a regulatory overhaul that could see its officials supervising companies in the world's largest gambling hub.

all fell heavily, bringing the drop to HK$109 billion ($14 billion).The slump came after Lei Wai Nong, Macau's secretary for economy and finance, late on Tuesday gave notice of a 45-day consultation on the gambling industry starting Wednesday, saying there were

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still some deficiencies in industry supervision.Beijing, increasingly wary of Macau's acute reliance on gambling, has not yet indicated how the licence rebidding process will be judged.Some Hong Kong stock analysts wasted little time in downgrading their view of the near-term prospects for casino operators in the Chinese special administrative region. All are required to rebid for licences when current permits expire in June 2022.

At J.P. Morgan, analyst D.S. Kim said the bank was downgrading all Macau gaming names from overweight to neutral or underweight due to heightened scrutiny on capital management and daily operations ahead of licence renewals."We admit it's only a 'directional' signal, while the level of actual regulation/execution still remains a moot point," he said, adding that the announcement would have already planted a seed of doubt in investors' minds. headtopics.com

TIGHTER REGULATIONAt a press briefing on Tuesday, Lei detailed nine areas for the consultation, including the number of licenses to be given, increased regulation and protecting employee welfare, as well as introducing government representatives to supervise day-to-day operations at the casinos.

read moreThe government is also proposing increasing Macau permanent residents' voting shares in the gaming concessionaires, as well as additional rules on the transfer and distribution of profits to shareholders.Discussions over the future of Macau's casino licences come amid rocky U.S.-China relations, leaving some investors fearing that U.S.-based casino operators may not fare as well as local players.

The government has not singled out any U.S. players, but there has been a push within the companies to beef up the presence of Chinese or local executives to position themselves more as a Macau operator rather than foreign.Ahead of the licence expirations, operators have tried to bolster their corporate responsibility and diversify into non-gaming offerings to placate Beijing's fears of over-reliance on gambling.

Macau has massively tightened scrutiny of casinos in recent years, with authorities clamping down on illicit capital flows from mainland China and targeting underground lending and illegal cash transfers.Beijing has also intensified a war on cross-border flows of funds for gambling, affecting the financing channels of Macau's junket operators and their VIP casino customers. headtopics.com

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In June this year, Macau more than doubled the number of gaming inspectors and restructured several departments to ramp up supervision.read moreGeorge Choi, an analyst at Citigroup in Hong Kong, said that while the public consultation document offered limited details, the suggested revisions enhance long-term sustainable growth for the industry with "positive implications on the six casino operators".

He cautioned, however, that "we will not be surprised if the market focuses only on the potentially negative implications, given the weak investor sentiment".The consultation comes as Macau has struggled with a dearth of travellers because of coronavirus curbs since the start of 2020. While gambling revenues have picked up in recent months, they remain at less than half of 2019 monthly hauls.

($1=7.7783 Hong Kong dollars)Additional reporting by Donny Kwok; Editing by Anne Marie Roantree and Kenneth MaxwellOur Standards:More from ReutersSign up for our newsletterSubscribe for our daily curated newsletter to receive the latest exclusive Reuters coverage delivered to your inbox.

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Factbox: How Macau is revising its multi-billion dollar gaming industryMacau's government begins a 45-day public consultation on Wednesday to gauge public opinion on changes to its gaming law ahead of the rebidding process of its multi-billion dollar casinos next year. Amazing how a tiny spot has turned into a gaming industry hotspot!

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