Macau casino stocks tumble after arrest of junket executive

Shares in Macau’s biggest listed casino groups fell sharply on Monday and the Chinese gambling hub’s biggest junket operator suspended trading following the arrest of its chief executive at the weekend.

Alvin Chau, chair of Suncity Group, was arrested in Macau on Saturday along with 10 other suspects over alleged cross-border gambling offences.

Chau is the highest-profile executive targeted by authorities in Macau since Beijing banned the promotion of gambling inside mainland China in March and the territory proposed tougher regulations on casinos in September.

The moves came as Chinese president Xi Jinping has embarked on a wide-ranging crackdown on inequality and perceived social ills that has hit some of the country’s biggest companies in tech, education, gaming and entertainment.

The Hong Kong-listed shares of MGM China fell 11 per cent on Monday, while Wynn Macau lost 9 per cent, Galaxy Entertainment Group dropped 8.8 per cent and Sands China shed 6.5 per cent.

Trading of shares of Hong Kong-listed Suncity was suspended “pending the release of an announcement in relation to news coverage regarding” Chau. The shares of Summit Ascent, a developer of a Russian casino resort linked to Chau, were also halted.

“We will not be surprised if investor sentiment towards Macau turns negative again on [Chau’s arrest] . . . However, such share price correction could be short-lived,” Citigroup analysts wrote in a note.

The arrest will “have very limited impact on Macau casino operators’ profitability”, they added.

Chau was detained one day after authorities in Wenzhou in eastern China issued an arrest warrant that accused him of “severely damaging the social order of the country” and operating a cross-border gambling syndicate. Gambling is legal in the former Portuguese colony but is outlawed in the rest of China.

Suncity did not reply to a request for comment.

Although the junket system — in which middlemen extend credit to lure high-rolling gamblers from the mainland — has been a mainstay of Macau’s gambling sector, it has also been a longstanding focus of Chinese authorities concerned about corruption and capital outflows.

Revenues from VIPs have declined in recent years even before the coronavirus pandemic choked off tourism flows to the city. The number of registered junkets in Macau dropped to 85 this year from more than 200 in 2013.

A proposed revision of the territory’s gaming laws would increase regulatory scrutiny of junkets and outlaw certain practices, threatening to further strain the subsector’s margins.

News of the proposed legal changes in September wiped $20bn off the market values of Macau’s biggest listed casinos, as an industry index suffered its worst one-day performance on record.

Kwok Chi-chung, chair of the General Association of Administrators and Promoters for the Macau Gaming Industry, which represents junket operators, said Chau’s arrest would have a “significant impact”.

“As the industry leader, [Chau’s] case has impacted on junket operators’ image,” he said. “Plus, we do not know yet how the new gambling law amendments will affect us . . . junkets will have to review how they should change to meet the reality operating under a new environment.”

Additional reporting by Tabby Kinder in Hong Kong

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