No Longer a Casino Sanctuary... China’s Ultra-Strict Macau Regulations Cause Casino Stocks to Plunge

China Strengthens Personnel Dispatch Supervision
$18.4 Billion Market Cap Evaporates in One Day

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Suhwan] Following the Chinese government's announcement of a crackdown on the gambling industry, including dispatching government officials to Macau's casino operators for monitoring and supervision, related companies' stock prices plummeted by up to 33%. This has raised concerns that Macau's status as a global casino hub may be threatened.

On the 15th (local time), Bloomberg reported that stock prices in the related industry plunged one after another immediately after the Chinese government announced plans to strengthen regulations on the casino industry.

According to the media, the stock prices of six major casino operators in Macau fell by an average of 23% in a single day, wiping out a market capitalization of $18.4 billion (approximately 21.5 trillion KRW). Bloomberg stated that this was the largest drop since it began tracking the data in 2005.

In particular, American casino companies suffered severe losses. The stock price of Sands China, the Chinese subsidiary of the U.S.-based Las Vegas Sands Corporation, dropped about 33% that day, while other U.S. companies Wynn Macau and Galaxy Entertainment fell by 30% and 20%, respectively. This marks the largest decline since their stock market listings.

The stock price plunge occurred immediately after the authorities announced plans to strengthen regulations. The government revealed plans to appoint government directors to casino companies for monitoring and supervision. Additionally, the government intends to require these companies to obtain approval before paying dividends to shareholders and to increase the shareholding ratio of Chinese local residents in casino companies.

An anonymous businessman engaged in lending to gamblers in Macau told Bloomberg, "There is no hope left in Macau," adding, "More investors will leave due to the government's increased intervention in the casino business."

Analysts suggest that China's regulatory measures aim to gradually reduce the gambling industry, which is often exploited for money laundering, and to reform Macau's economy, which is heavily dependent on the casino sector, by diversifying it. Currently, the gambling industry accounts for 55.5% of the city's total GRDP (Gross Regional Domestic Product).

Jason Alder, CEO of Spring Owl, a New York-based asset management firm, said, "Casino regulation is an extension of the Chinese government's comprehensive economic regulatory measures," adding, "There is now debate about whether it is still viable to invest in China."

However, some believe that the Chinese government's regulatory tightening will not cause significant damage to Macau's gambling industry. At a press conference the previous day, global investment firm Bernstein stated that the Chinese government is expected to continue approving the business licenses of the six major casino operators in Macau, and "since these companies are already working closely with the Chinese government, the strengthened regulations are not expected to have a major impact on the casino business."