Macau’s top gaming stocks yesterday lost a record US$18.4 billion in combined market value after officials said that they would change casino regulations to tighten restrictions on operators, including appointing government representatives to “supervise” companies in the world’s biggest gaming hub.
The Bloomberg Intelligence index of the six big casino operators fell a record 23 percent.
US operators registered the worst sell-offs, with Sands China Ltd (金沙中國) sinking as much as 33 percent, while Wynn Macau Ltd (永利澳門) plunged 34 percent, both the steepest declines ever. Galaxy Entertainment Group (銀河娛樂集團) slumped 20 percent, its sharpest drop in a decade.
The sector also led declines in China’s US dollar bond market.
A note due 2028 from Wynn Macau sunk 9 cents on the US dollar to US$0.914, according to Bloomberg-compiled prices, set for its biggest-ever decline.
US dollar bonds from SJM Holdings Ltd (澳門博彩控股), MGM China Holdings Ltd (美高梅中國控股) and Melco Resorts and Entertainment (新濠博亞娛樂) dropped at least US$0.03.
Officials in the territory, the only place in China where gambling is legal, said they would begin a 45-day public consultation period yesterday to discuss the legal revisions.
Among the topics would be how many licenses — known locally as “concessions” — would be issued, how long their terms would be and the level of supervision by the authorities.
While license renewals have been expected for some time as the current ones expire in June next year, the move to tighten regulations took the industry by surprise.
Besides appointing government representatives, the revisions also propose increasing local shareholdings of casino companies, without elaboration on how these moves would be enacted.
Dismay rippled through industry players and analysts after the announcement as China’s ongoing clampdown on sectors from gaming to after-school tutoring appears to have reached Macau.
“The casino issues are a continuation of what’s been a pretty big crackdown,” said Jason Ader, chief executive officer of New York-based investment manager SpringOwl Asset Management and a former Las Vegas Sands Corp board member. “There’s a debate over whether China is even investable right now. You never like to see increased regulation, increased taxes, restrained movement. That all seems to be the status quo.”
JPMorgan Chase & Co analyst D.S. Kim downgraded the six operators to sell or neutral weightings in a research note.
“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,” he wrote.
The tightened scrutiny comes at a time when Macau is still struggling to recover from the COVID-19 pandemic, which prompted authorities to restrict travel, cutting off the economy’s lifeblood of Chinese punters.
Gaming revenue was 82 percent lower last month than the same period in 2019.
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