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Macau casino stocks dip following Crown staff arrests

Macau’s casino shares saw a dip in price after it was announced that Chinese authorities detained 18 employees of Crown Resorts for suspected “gambling crimes.”

According to a report from Bloomberg, Sands China Ltd. dropped 3.3 percent, while Galaxy Entertainment Group Ltd. shares fell 4.3 percent. The Bloomberg Intelligence index of Asia Pacific casino stocks decreased 2.8 percent, while Crown Resorts shares went down 14 percent.

Jamie Soo from Daiwa Capital Markets said the arrests have prompted staff from some Macau casinos to leave China after “large-scale staff departures” from Crown and other Australian casino operators. Disruptions will be most heavily felt in Macau’s VIP and premium mass segments, he said.

“This is a clearer signal to all casino operators and junkets in the region, that the Chinese government doesn’t like gambling and will continue the crackdown on the industry and capital outflow,” said Tony Tong, founder of Hong Kong-based risk management consulting firm Pacific Financial Services Ltd. quoted by Bloomberg.

However while many Asian gaming stocks fell, Union Gaming analysts believe the sell off was “unjustified”, and should not have negative implications for Macau operators as of yet.

“Most Asian gaming equities participated in today's sell off, including the Big 6 Macau names. We would argue unjustifiably so as we think that what happened seems to be business as usual,” said Union Gaming in a note on Monday. “...despite the frequency with which arrests of marketing agents has occurred over the years it hasn't changed the business models of the casino operators involved nor does it seem to have had a material impact on revenues.”

“While we would expect Crown reassess its China marketing strategy, we don't think this incident has negative implications for the Macau operators (yet). Based on what we've learned so far the Crown arrests do not seem to represent a new tactic on Beijing's part,” the brokerage noted.

According to a report from Australia’s Fairfax Media on Monday, Chinese authorities are preparing to charge the 18 Crown staff with with “organising gambling activities for mainland nationals overseas.”

Sources familiar with the investigation told the media outlet that the line of inquiry has focused on the sales and marketing activities of the 18 staff, and the inducement and facilitation for Chinese nationals to travel to Australia to gamble.

"Under our country's laws, it is not just gambling and opening casinos in China which fall under gambling crimes," said one unnamed source, quoted by Fairfax Media. "If you organise or introduce our country's citizens to go overseas to gamble, if it's more than 10 people then you will face criminal liability."

Asia Gaming Brief is a news and intelligence service providing up to date market information for worldwide executives on relevant gaming issues in Asia.

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