US Casino Stocks Drop as Macau Government Review Regulations

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The Macau government’s drive to increase casino oversight has wiped close to $20 billion from the market. On Tuesday, the Macau government brought forward its expectations on the future of the gambling market. Part of this was increased scrutiny on casino operations.

Gaming analysts forewarned that the move would hurt the economy and strip it more, adding to the hiccups coming along with Covid-19. Sands China shares dropped by 32.5%, Wynn Macau by 29%, and MGM China fell by 27%. Melco International and Galaxy Entertainment were not spared either, as their shares dropped by 20% each, and losing by 24% was SJM Holdings.

Expiring Licenses

In June 2022, six casino licenses will experience whereas the local government has not yet laid plans on licenses renewal. Wynn Resorts Ltd, MGM Resorts International, and Las Vegas Sands Corp hope for faster action by the local government.

As stated in a press conference, the Macau government will take over a month to engage the public on new Macau gambling laws. The government says it is working towards a sustained and healthy development of the gambling industry. Lei Wai, Macau’s secretary of Economy and Finance, said that the only way to achieve this goal is improving casino regulations.

Lei also gave nine consultative sectors which the government seeks to achieve, including owning several licenses, better regulations, and employee welfare.

According to Mr. Lei, the new laws seek to incorporate social responsibility in the gambling industry and push the industry to promote nongambling activities. He said organizing major international events to attract more tourists and boost Macau’s economy is what the government foresees. The new laws will enhance the government’s supervision of the industry. Any illegal gambling practices will have hefty fines.

Sanguine Observers

Vitaly Umansky said, “Macau’s outdated gaming law needs to be refreshed in order to move on with the next phase of the gaming concession process.

 

“He said that though there are not many details in the government’s announcement on Tuesday, there so far “no big red flags.”

Macau’s proposed casino laws seek to examine junkets, a subsector rising in the gambling sector gain high rollers from the mainland to Macau on credit. The junkets dent VIP revenue, which is way lower than before, follows the president’s support on anti-graft drive 10 years ago.

Alidad Tash, a gaining consultant at 2nt8 Limited, said the drive to remove junkets would have more considerable effects. He said China’s capital controls prevent its citizens from bringing in a lot of money to Macau.

 

“The highly profitable premium mass segment does rely on junkets to lend capital to those coming over from mainland China,” Tash further predicted that Wynn and SJM would be the first casinos to feel the impact of VIP package restrictions.

“We think this announcement would have already planted a seed of doubt in investors’ minds, which is probably enough to de-rate these names until clarity emerges on key points…We admit it’s only a ‘directional’ signal, while the level of actual regulation or execution remains a moot point.”

 

“DS Kim wrote after it downgraded all Macau casino operators to neutral or underweight. Some investors like George Choi are optimistic that “all the suggested revisions [of the law] are there to enhance long-term sustainable growth.”

 

“Margins will be crushed at the gambling capital of the world, and that will drag down all the big casinos,” OANDA’s senior market analyst Edward Moya said.

 

Desmond Lam, an associate professor in gaming management at the University of Macau, said,

 

“It will keep the casinos more down to earth, aligning Macau casino operations more closely to the government’s as well as the community’s concerns.”

The Macau government is imposing stringent gambling measures on the country’s leading tech, online, and video gaming companies. It is a strategy to mold society’s social behavior brought through this sector.