China detains 18 staff from Australia's Crown Resorts for alleged gambling crimes

A general view of the Crown casino in Melbourne.
A general view of the Crown casino in Melbourne.PHOTO: AFP

SYDNEY/HONG KONG (REUTERS) - Australian casino giant Crown Resorts Ltd said on Monday (Oct 17) that China had detained 18 of its employees including three Australians, sending gaming stocks tumbling on concerns about their strategy for luring Chinese gamblers.

The Sydney-listed company, 53 per cent owned by billionaire James Packer, said it had not made contact with its employees, including Australia-based head of international VIP gambling Jason O'Connor, and was not aware why they had been detained.

China's Foreign Ministry told Reuters in a statement that it had detained some Australian nationals for suspected "gambling crimes" without further explanation. It said it was still investigating the matter.

Crown shares fell 14 per cent, their biggest ever one-day decline, while smaller Australian rival Star Entertainment Group Ltd dropped as much as 6 per cent, amid concerns about the impact the move would have on the companies' ability to attract wealthy Chinese gamblers to major new developments in Australia.

Mr Vitaly Umansky, an analyst at Bernstein in Hong Kong, said the detentions appeared to be a repeat of China's crackdown on South Korean casino marketing efforts a year earlier, a move seen less as an attempt to curb Chinese gambling than to keep it under domestic control.

"The Chinese government seems to be making a clear statement about its view on gaming activity being offshored to foreign jurisdictions, while Macau is not being targeted in the same way," said Mr Umansky.

Thirteen South Korean casino managers were arrested in China in 2015 for offering Chinese gamblers free tours, free hotels and sexual services.

Melbourne-based Crown holds a 27-per-cent stake in Melco Crown Entertainment Ltd based in the Chinese territory of Macau. It does not directly run casinos in China but relies heavily on Chinese gamblers at its Australian operations.

Shares in other non-Chinese Macau gambling companies also fell, including Melco Crown, down as much as 5.6 per cent, Wynn Macau Ltd and Sands China.

"GOT IT WRONG"

Although it remained unclear what prompted the mass detention, analysts said the move suggested Crown had misread the enforcement climate about marketing its venues on the mainland, where gambling is illegal except for regulated state-sanctioned lotteries.

Most other operators have toned down their marketing in China over the past two years, focusing on their live shows, restaurants and accommodation.

"Crown apparently either thought nothing to worry about, or they have only recently revived operations in (China). Whatever, they got it wrong," said Mr David Green, an analyst at Newpage Consulting, which focuses on the gambling industry in Asia.

The detention may affect Crown's operations in its home country too. Crown is planning a A$2 billion (S$2.1 billion) gaming resort on the Sydney waterfront, targeted largely at Chinese tourists.

"It's getting harder and harder to see how you continue to do business in that space when regulatory increases are clearly the highest risk factor," said Mr Evan Lucas, a strategist at IG Markets.

The Crown staff were held following raids in Shanghai, Beijing, Guangzhou and Chengdu, the Australian Financial Review reported on the weekend. Crown did not comment on the circumstances of the detentions.

Australia's Department of Foreign Affairs and Trade said in a statement that it was aware of the matter and that Chinese authorities had three days - until Monday - to notify it about the situation.

Mr Packer stepped down as co-chairman of Melco Crown earlier this year, as a Chinese government corruption crackdown put the brakes on gaming revenues in Macau.