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Macau Casino Stocks Crash After High Profile Arrests
By Shane Addinall Dec 04, 2021 LegalityAs the Chinese government seeks to protect its slowing economy it has become more aggressive regarding gambling reform in Macau. Is the arrest of a prominent gambling executive a well-timed part of this initiative?The world of casino and casino junket gambling in Macau saw a major shakeup earlier this week as news broke that China had issued an arrest warrant for Alvin Chau, CEO of Suncity Group’s VIP rooms in the region.
The warrant alleged that Chau, and as many as ten others involved in junket operations, were running illegal cross-border gambling operations which carries with it charges of money laundering.
It was not only the junket market that felt the backlash of these allegations as several licensed Macau casino operators including Wynn Macau, Sands China, MGM China, and Galaxy Entertainment saw their valuations plummet as concerned investors dumped their stocks across both US and Hong Kong exchanges.
Crossing The Line
The Suncity Group is one of the largest casino operators in Macau, with analysts listing it as carrying more than 40% of the local market. This has allowed the operator to run casino junkets in the region where they arrange trips for high-value gamblers to play at selected casinos.
Most often these trips and activities are regulated by the local gambling authorities which ensures that the players only gamble at lawful venues. The charge brought against Chau and his fellows is that they were running junkets that encouraged wealthy Chinese punters to play at international casinos.
This is highly illegal as according to Chinese law its citizens may not gamble even when travelling abroad to regions where gambling is legal. The enforcement of this law has seen high profile individuals face criminal action back in China for gambling in Las Vegas, Monaco, and other international gambling hot spots.
The Winds of Change
In an interesting news broadcast on Bloomberg, reporter Shirley Zhao shared her insights into the upcoming changes that are being promoted in China, and by extension Macau, in terms of its current gambling regulation.
She noted that China and its anti-gambling bodies have been pushing for a crackdown on Macau’s reliance on gambling revenues. With Suncity Group representing more than 40% of the regions junket business and nearly 20% of its local casino revenue generation, these criminal charges are being seen as China’s opening salvo in terms of forcing Macau to begin diversifying its income sources.
The knock-on effect of these actions was immediately apparent with VIP rooms across Macau virtually empty, a stunning blow to the bottom-line of an industry that processed several million dollars in wagers every night.
Is Macau’s End Near?
With the licenses for junkets coming up for renewal within the next few months the timing of these allegations is perfectly timed to assist the government in its reformulation of Macau gambling legislation which will undoubtedly come with far stricter measures, a reduction in available licenses and perhaps even harsh limits on player spend aimed at contracting the gambling markets financial power in the region.
The latest report from Chinese media outlets is that Chau has pleaded guilty to the charges of operating illegal gambling tours, only time will tell how much of a blow this has dealt to Macau’s gambling interests. What we do know is that if the Chinese government has determined that the gambling market will shrink, we can look forward to more cases like these surfacing as we head into 2022.
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