Macau casino stock dropped on Monday, bounced by the detentions of 11 people over claimed cross-border betting and financial fraud connections, with the creator of the gaming hub’s largest junket provider suspected to be among those held in custody.
MGM China (2282.HK) dropped 11%, Wynn Macau (1128.HK) dropped 9%, and Sands China (1928.HK) dropped 6% as investors worried about the short-term impact as well as the long-term effects of the authorities in Macau and mainland China’s new harsh approach on the market.
Alvin Chau, the CEO of gaming industry investment business Suncity Group Holdings (1383.HK) and the creator of Suncity, a junket provider that takes in rich folks to play at casinos, extends them credit, and collects on their debts, is widely assumed to have been detained.
Macau authorities had earlier stated that he was being questioned by police, and police confirmed that a 47-year-old businessman named Chau was among those held at a press conference on Sunday.
These events came after Wenzhou, a city in eastern China, filed a warrant of detention for Alvin Chau on Friday, charging him of operating gambling operations in mainland China, where gambling is outlawed.
Carlos Lobo, a gaming expert in Macau said, in Macau, Suncity contributes over 50% of junket income, which represents around 50% of gaming income, so Suncity counts for 25% of gaming income.
“The gaming business will be severely impacted. However, Suncity is no longer too massive to fail, and the system will not crumble.”
The 11 people seized on Sunday confessed to some claims, such as developing overseas gambling platforms and engaging in unlawful virtual betting activities but refused to cooperate on other matters, according to Macau police.
Authorities in Wenzhou have suspected Chau of developing a junket agent network on the mainland to assist residents in offshore and cross-border gambling, as well as establishing an asset management company on the mainland to assist gamblers in making cross-border financial transfers.
According to Ben Lee, founder of Macau gaming consultancy IGamiX, the crackdown heralds a new age for gambling in Macau and its connection with mainland China. Ben explained:
“It signifies that China will no longer accept Macau promoting gambling on the mainland in any form or fashion.”
He added that officials had shifted on to managing the type of visitors after learning they could control the flow of visitors into Macau with the implementation of COVID-19 border regulations, and that instead of high-rollers, the specific governmental area would now have to depend on mass-market gamers.
Suncity Group’s stock was banned from trading on Monday, with a market capitalization of HK$1.7 billion ($220 million). They’ve dropped 165 percent so far this year as the former Portuguese colony’s casinos struggle with a lack of visitors owing to coronavirus restrictions.
Chau also owns a controlling stake in Sun Entertainment Group Ltd (8082.HK), a film production and cremation services company whose stock fell 25% on Monday. Its board stated that it did not feel Chau’s personal affairs would have a major influence on the company’s operations.
Prior to the COVID-19 epidemic, Macau’s government received more than 80% of its tax revenue from the gaming sector, which directly or indirectly employed around three-quarters of the territory’s 600,000 residents.