Macau Casino Stocks Shed $20B in Fear of Tighter Gaming Regulation

On Wednesday, September 15th, Macau started its 45-day public gaming consultation period to weigh the general opinion prior to a closely monitored rebidding of its casinos worth billions of dollars. As this public comment period begins, China’s Special Administrative Region (SAR) is expected to introduce tighter restrictions. The expectation of tougher regulation has sent shockwaves of fear across the world’s largest gambling hub, a mood that has spilled over to the stock market.

In a Tuesday press briefing, Macau’s Secretary for Economy and Finance, Lei Wai Nong, said that the government aims to foster the gambling sector’s ‘sustained and healthy development’ because some deficiencies still exist in how the industry is currently regulated. In addition, the Gaming Inspection and Coordination Bureau (DICJ), Macau’s gaming watchdog, said that the public consultation period will close on October 29th.

Gaming Industry Stocks Fall Like Dominoes

In light of Mr. Lei’s comments, a market value of more than $20 billion was wiped off the stock of publicly traded gambling operators after massive selloffs the following day. According to a report by the Financial Times, on Wednesday, shares of Sands China dipped 32.5%, Wynn Macau plummeted 29%, whereas MGM China nosedived by 27% in the Hong Kong stock exchange. Similarly, SJM Holdings tumbled 24%, with both Galaxy Entertainment and Melco International dipping 20%.

The Bloomberg Intelligence Macau Gaming Composite index, Bloomberg’s tracker for the performance of listed casino operators in the gambling mecca of the east, dipped by 23% at the end of the trading day. This loss was the tracker’s worst single-day performance yet.

In the west, the stricter oversight news also ricocheted in many US-based parent companies of the casino operators in China’s SAR. For example, Melco saw a 12.9% decline late Wednesday morning, while Melco experienced an 8% dip. On the other hand, MGM Resorts International and Las Vegas Sands had less than severe impact, with 4.6% and 3.9% drops, respectively.

Main Objectives Macau’s Gaming Reforms

As the public comment period begins, the Macau government is paving the way for the revision of the city’s gaming law. Authorities plan to complete the revision process by the fourth quarter of 2021 before the finalized draft bill is forwarded to the Legislative Assembly. According to GGR Asia, in his briefing on Tuesday, Mr. Lei disclosed that the public participation in the gaming reforms would address nine main concerns, which are:

The number of concessions that should be issued. Initially, there were reports that Macau would potentially switch to a system of licensing casinos individually. However, with the question of the number of concessions, it is clear that there won’t be a shift to such a system.
Duration of the terms of any new concessions
New regulatory requirements that need to be introduced for concessionaires
The steps that should be taken to protect Macau’s local employment
How to assist ID holders in Macau to advance in their gambling industry careers
Promotion in the non-gaming industry
The gaming sector’s corporate social responsibility
How to revamp the monitoring of junkets and their business associates
How to handle the problem of private investor deposits in the gaming industry, which has previously led to losses for members of the local public

Macau’s six gaming concessions are set to expire in June 2022, lest the operators receive a limited extension from authorities per the city’s gaming law. However, during Tuesday’s briefing, Macau’s gaming ombudsman DICJ (Direçãi De Inspeção E Coordenação De Jogos or Gaming Inspection and Coordination Bureau) declined to comment on the extension of the current gaming concessions.

The tighter regulation scare comes at a time when Macau continues to struggle with reduced tourist inflows since the Coronavirus pandemic hit the industry hard last year. Even though monthly gambling revenue has since bounced back, it is still less than half of what the thriving industry was bagging in 2019.