The tide turned swiftly on Friday last week in Suncity Group’s VIP rooms across casinos in Macau, where millions of US dollars are bet on blackjack and baccarat every night.
As the news broke that Chinese authorities had issued an arrest warrant for Suncity CEO Alvin Chau (周焯華), high rollers scurried to leave, fearing police raids on the exclusive arenas that have helped make the Chinese territory the largest gambling hub in the world.
Suncity’s gaming rooms were nearly empty last weekend, with punters not wanting to be associated with Macau’s largest junket operator, according to people familiar with the matter who did not want to be identified.
Illustration: Constance Chou
Chau was detained by police on Saturday last week. By Monday, Suncity’s stock was suspended, and casino operators’ shares in the US and Hong Kong were sliding.
When trading resumed on Tuesday morning, shares of Suncity’s listed arm, which does not include its junket operation, plummeted 48 percent in Hong Kong.
The arrest of Chau — one of the most high-profile figures in Macau’s gambling world, whose love life is a favorite topic of the Hong Kong tabloids — sent shockwaves through an industry already under siege from growing government intervention.
In some ways, it was seen as a bigger blow to Macau than proposed legal changes aimed at bolstering oversight of casinos that less than three months ago wiped US$18 billion off gaming stocks. The final contours of the law are not yet known, but the message sent by Chau’s arrest was unmistakable.
His detention is “much more clear cut in terms of what China intends for Macau going forward” than the legislative proposal, said Ben Lee (李忠良), a Macau-based managing partner at consultancy firm IGamiX.
The underlying message is that the territory’s gaming industry should not promote itself in mainland China, and operators should focus on developing more non-gambling elements to attract visitors, he said.
In essence, that means the disappearance of a shadowy industry — the junket network — that channels some three-quarters of Macau’s roughly US$3 billion in annual VIP gaming revenue by bringing Chinese punters on trips to the territory, wooing them with private jets, hotel suites and, crucially, credit lines to gamble in Hong Kong dollars that can be repaid in Chinese yuan or with assets.
Chau’s arrest indicates that this whole practice is in Beijing’s sights.
BLACK HOLE
“We are seeing signs of China’s economy slowing down. They are more concerned about stopping any leakage of funds from the economy, and the Macau gambling industry has always been a black hole,” Lee said.
The probe into Suncity has led to the arrest of 11 people, including Chau, for establishing overseas gambling platforms, carrying out illegal virtual betting activities and money laundering.
Suncity accounted for more than 40 percent of Macau’s junket market, or about 15 percent of the city’s gaming revenue in 2019, JPMorgan Chase analysts have said. They predict that Macau’s junket-driven VIP revenue pile could contract by half in the coming weeks.
By 2023, the VIP sector might only drive about 4 percent of casino operators’ earnings, they estimated, compared to 15 percent in 2019.
The Chinese Communist Party, which bars casinos on the mainland and has long disapproved of gambling, has been laying the groundwork for the dilution of Macau’s reliance on gaming for some time. Beijing wants the former Portuguese colony to become a center of leisure and tourism, which means sports stadiums, convention centers and traditional Chinese medicine parks instead of more baccarat tables.
However, the ties have been difficult to break.
NO OFFICIAL TIES
The enclave’s six casino operators have no official links with junkets such as Suncity, but have relied on them for decades to bring in high rollers. About 35 percent of their US$68 billion in gaming income came from the VIP segment this year.
Without junkets, Macau casinos could suffer a 34 percent decline in gaming revenue and an 8 percent drop in profit, assuming some of the VIP gamblers would bet less and become part of casinos’ so-called premium mass clients, Bloomberg Intelligence analyst Angela Hanlee said.
Cleaning up the industry could ease the risk of future regulatory crackdowns, helping the long-term valuation, she said.
However, investors are anxious about the short term. After Macau’s judiciary police said on Sunday last week that Chau confessed to some of the allegations against him, an index of six casino operators tumbled 7.6 percent, the most in over two months, wiping out billions of dollars in combined market value.
The BI gauge of Macau casino shares has slumped 50 percent over the past two years as operators endured blow after blow: first the COVID-19 pandemic cutting off Chinese visitors, then the proposed legal changes that tighten Beijing’s oversight over profits and operations, and now what appears to be a renewed junket crackdown.
While Macau is the only place in China where gambling is legal, many junkets have operations on the mainland to solicit gamblers, collect debts and help clients move money across the border through means such as swapping assets for casino chips.
China has been upping scrutiny of junkets over the past decade with intermittent arrests of agents, resulting in VIP revenue steadily trending downward. Some smaller junket operators have already stopped using mainland Chinese agents to help promote gambling and no longer provide credit lines for clients, people familiar with the matter said.
Instead they behave like tour operators, arranging transportation, hotels and dining, the sources said.
The pandemic, which effectively erased Macau’s chief source of revenue, has hammered the industry. Casinos had their worst month of the year in October with gaming revenue down 40 percent to 4.37 billion patacas (US$544.7 million) from a year earlier. Revenue has fallen 83 percent from pre-pandemic levels in 2019.
It is a far cry from Suncity’s peak period circa 2013, when the company’s VIP rooms in one month had more than HK$180 billion (US$23.1 billion) pass through.
Suncity said on Monday last week that the company, its subsidiaries and staff are not under investigation in connection with Chau’s arrest, but that its business and operations would be adversely affected if it loses the financial support of Chau, who intends to resign as chairman and executive director.
That a figure such as Chau can be arrested “for just running the junket and doing normal junket activities should send a chill down the spine of any and all junkets,” JPMorgan analyst DS Kim said in a note on Saturday last week.
Recently, China launched another diplomatic offensive against Taiwan, improperly linking its “one China principle” with UN General Assembly Resolution 2758 to constrain Taiwan’s diplomatic space. After Taiwan’s presidential election on Jan. 13, China persuaded Nauru to sever diplomatic ties with Taiwan. Nauru cited Resolution 2758 in its declaration of the diplomatic break. Subsequently, during the WHO Executive Board meeting that month, Beijing rallied countries including Venezuela, Zimbabwe, Belarus, Egypt, Nicaragua, Sri Lanka, Laos, Russia, Syria and Pakistan to reiterate the “one China principle” in their statements, and assert that “Resolution 2758 has settled the status of Taiwan” to hinder Taiwan’s
The past few months have seen tremendous strides in India’s journey to develop a vibrant semiconductor and electronics ecosystem. The nation’s established prowess in information technology (IT) has earned it much-needed revenue and prestige across the globe. Now, through the convergence of engineering talent, supportive government policies, an expanding market and technologically adaptive entrepreneurship, India is striving to become part of global electronics and semiconductor supply chains. Indian Prime Minister Narendra Modi’s Vision of “Make in India” and “Design in India” has been the guiding force behind the government’s incentive schemes that span skilling, design, fabrication, assembly, testing and packaging, and
Singaporean Prime Minister Lee Hsien Loong’s (李顯龍) decision to step down after 19 years and hand power to his deputy, Lawrence Wong (黃循財), on May 15 was expected — though, perhaps, not so soon. Most political analysts had been eyeing an end-of-year handover, to ensure more time for Wong to study and shadow the role, ahead of general elections that must be called by November next year. Wong — who is currently both deputy prime minister and minister of finance — would need a combination of fresh ideas, wisdom and experience as he writes the nation’s next chapter. The world that
As former president Ma Ying-jeou (馬英九) wrapped up his visit to the People’s Republic of China, he received his share of attention. Certainly, the trip must be seen within the full context of Ma’s life, that is, his eight-year presidency, the Sunflower movement and his failed Economic Cooperation Framework Agreement, as well as his eight years as Taipei mayor with its posturing, accusations of money laundering, and ups and downs. Through all that, basic questions stand out: “What drives Ma? What is his end game?” Having observed and commented on Ma for decades, it is all ironically reminiscent of former US president Harry