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Shares of Macau casino operators lost up to a third of their value on Wednesday, with a loss of about $ 18 billion as the government launched a regulatory review that could see its officials overseeing the center’s businesses. of the world’s largest games.
With Macau’s profitable casino licenses to be re-tendered next year, the plan scared a Hong Kong market already in the black following Beijing’s regulatory crackdown on technology sectors in education and education. property that reduced hundreds of billions of dollars in asset values.
Wynn Macau (1128.HK) caused a drop to a record low of 34%, followed by a 28% drop for Sands China (1928.HK). MGM China pairs (2282.HK), Galaxy Entertainment (0027.HK), SJM (0880.HK) and Melco Entertainment (0200.HK) it all fell sharply, to A $ 143 billion ($ 18 billion).
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A woman rests next to the decoration inside the Wynn Palace casino complex in Macau, China, on December 20, 2019, on the 20th anniversary of the return of the former Portuguese colony to China. REUTERS / Jason Lee
U.S. casino companies also fell for the second day in a row, losing up to $ 4 billion in market capitalization on Wednesday, with Las Vegas Sands Corp. (LVS.N) Wynn Resorts Ltd (WYNN.O) and MGM Resorts International (MGM.N), falling by 8% and 5%, respectively.
The fall came after Lei Wai Nong, Macau’s secretary of economy and finance, warned on Tuesday of a 45-day consultation period on the gaming industry that would begin the next day, pointing out shortcomings. in industry supervision.
Beijing, increasingly wary of Macau’s acute reliance on gambling, has yet to say how the license withdrawal process will be judged.
“The margins will be crushed in the gaming world capital and this will drag all the big casinos,” said Edward Moya, OANDA’s senior market analyst in New York.
Some Hong Kong securities analysts wereted no time in lowering their view of the short-term outlook for casino operators in China’s special administrative region, which must re-apply for licenses when current permits expire in June 2022. .
JP Morgan is shifting from neutral to lightweight in all Macau gaming names due to overweight, due to tighter control over capital management and day-to-day operations prior to license renewals, the analyst said. DS Kim.
“We admit it’s just a‘ directional ’signal, while the level of actual regulation or enforcement remains a debatable point,” he said, adding that the news would have already put doubts in the minds of investors.
CFRA brokerage changed Wynn Resorts to “Strong Sell” from “Buy,” citing high regulatory risks and said the review was a major breakthrough for the company and other operators.
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In a briefing on Tuesday, Lei detailed nine areas for consultation, such as the number of licenses, better regulation and employee welfare, in addition to having government representatives to oversee the day-to-day operations of the casino.
The government also plans to increase voting quotas at gaming concessionaires for permanent residents of Macau, as well as more rules on the transfer and distribution of profits to shareholders.
Discussions about the future of Macau’s casino licenses are taking place amid rocky relations between the United States and China, prompting some investors to fear the advantages of domestic players over U.S.-based casino operators.
The government has not identified any US players, but companies have decided to strengthen the presence of Chinese or local executives, as they position themselves more as Macau operators than as foreigners.
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Before the license expires, operators have tried to bolster corporate responsibility and diversify into non-gaming offerings to appease Beijing, which fears over-reliance on gaming.
Macau has spurred the exploration of casinos in recent years, reducing illicit capital flows from mainland China and targeting underground lending and illegal cash transfers.
Beijing has also intensified the war against cross-border flows of funds to gamble, securing funding from Macau operators and their VIP customers.
In June, Macau more than doubled the number of game inspectors and restructured departments to increase oversight.
George Choi, a Citigroup analyst in Hong Kong, said that while the public consultation paper gave few details, the suggested changes benefit long-term sustainable growth, with “positive implications for all six casino operators.”
However, he warned: “We will not be surprised if the market focuses only on potentially negative implications, given the weak sentiment of investors.”
The query comes when Macau has had problems with the lack of passengers due to the curvature of coronavirus since early 2020. Although gambling revenues have risen in recent months, they are still less than half of the monthly figures for the world. 2019.
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Additional reports by Donny Kwok, Shreyasee Raj, Kannaki Deka and Shreyashi Sanyal; Edited by Anne Marie Roantree, Clarence Fernandez and Arun Koyyur