Casino stocks dive after China's move to restrict ATM withdrawals in gambling hub Macau

The Macau Tower standing amongst other buildings in Macau, China, on July 16, 2014.
The Macau Tower standing amongst other buildings in Macau, China, on July 16, 2014.PHOTO: BLOOMBERG

NEW YORK (Bloomberg) - Casino stocks dropped in Australia and the United States after a report that China is imposing a 50 percent cut on Unionpay ATM withdrawal limits in Macau, widening a crackdown on how gamblers move cash into the gambling enclave.

The cap takes effect Saturday, reducing the ceiling to 5,000 patacas, the newspaper reported. Crown Resorts dropped as much as 8 per cent, the biggest decline in almost two months, in Sydney trading on Friday.

China has been tightening its capital controls as depreciation pressure builds on the yuan. The measures have included a pause on some foreign acquisitions and bigger administrative hurdles to taking yuan overseas, people familiar with the steps have told Bloomberg News. At the same time, Macau's US$30 billion gaming industry has rebounded as operators including Wynn Macau Ltd. opened new resorts. Gross gaming revenue rose for the fourth straight month in November, recording the strongest year-on-year growth since February 2014.

"The controls they have put into place are consistent with the controls they have put into place in the past," MGM Resorts International Chief Executive Officer Jim Murren said in an interview on CNBC. "I don't want to minimise the significance - it will reduce some revenue - but the long-term play is an extremely positive story."

Almost a million Chinese tourists visited the former Portuguese enclave in the first seven days of October for Golden Week, the most in at least a decade.

The Macau Monetary Authority's limit on withdrawals in Macau is designed to further tighten rules on the use of China UnionPay Co. cards, the South China Morning Post reported. Law enforcement officials have scrutinized UnionPay transactions as a way for people to illegally take cash out of China.

Casino operators' shares also slid in New York on Thursday. Wynn Resorts fell as much as 12 percent, Las Vegas Sands Corp. dropped 13 percent and MGM Resorts International sank 4.3 percent. Melco Crown Entertainment Ltd. plunged 14 percent. Las Vegas Sands declined to comment, while other casino operators didn't immediately respond to requests for comment.

Macau's government began restricting UnionPay debit cards in 2014, ordering jewelry shops and pawnshops on casino floors to remove the company's card terminals. Four people were arrested in the gambling enclave last year on suspicion of illegally using altered UnionPay terminals to obtain cash for clients. In Hong Kong, UnionPay account holders were blocked in October from using their cards to buy insurance, which gave them another potential way to move money overseas by swiping the cards multiple times.

Macau is in the midst of a surge in new casino construction, with new billion-dollar resorts popping up that target casual gamblers instead of the high rollers that form the bulk of its gambling customers.  Wynn opened its most expensive casino in Macau, the US$4.2 billion Wynn Palace, in August. Sheldon Adelson's Las Vegas Sands opened the US$2.9 billion Parisian Macau in September, and MGM is planning to open the US$3.1 billion MGM Cotai next year.