Shares of Macau casinos plunge amid arrests

HONG KONG • Macau casino stocks tumbled yesterday, rattled by the arrests of 11 people over alleged links to cross-border gambling and money laundering, with the founder of the gaming hub's biggest junket operator among those detained.

Shares in MGM China plunged 10 per cent, Wynn Macau lost 7.8 per cent and Sands China fell 5.3 per cent as investors fretted about the near-term potential loss of business as well as the longer-term implications of the watershed hardline stance being taken towards the sector by the authorities in Macau and mainland China.

Alvin Chau, the founder of Suncity - a junket operator that brings in high rollers to play at casinos, extending them credit and collecting on their debts - as well as the CEO of gambling sector investment firm Suncity Group Holdings were among those held, said Macau broadcaster TDM.

The authorities in Wenzhou, China's Zhejiang province, previously said police were questioning a 47-year-old businessman surnamed Chau, without elaborating on his identity.

Last Friday, an arrest warrant was issued for Alvin Chau, accusing him of operating gambling activities on the mainland where gambling is illegal.

"Suncity accounts for over 50 per cent of junket revenue (in Macau), which accounts for roughly 50 per cent of gaming revenues, so Suncity accounts for 25 per cent of gaming revenues," said Mr Carlos Lobo, a Macau-based gaming consultant.

"The impact on the gambling industry is huge... But (Suncity) is no longer too big to fail, the system will not collapse."

Suncity Group Holdings did not respond to a request for comment.

Macau police said on Sunday that the 11 people arrested had admitted to some allegations, including setting up overseas gambling platforms and conducting illegal virtual betting activities, but had declined to cooperate on other issues.

Wenzhou authorities have accused Chau of forming a junket agent network on the mainland to help citizens engage in offshore and cross-border gambling activities as well as setting up an asset management company on the mainland to help gamblers make cross-border fund transfers.

The tougher stance - which comes amid a broad regulatory clampdown in China on a range of sectors including tech and property - signals a new era for gambling in Macau and its relationship with mainland China, said Mr Ben Lee, founder of Macau gaming consultancy IGamiX.

"It means that China will no longer tolerate Macau promoting in any form or manner of gambling into the mainland," he said.

He added that the authorities, having learnt they could control the flow of visitors into Macau with the advent of Covid-19 border controls, have now moved on to controlling the type of visitors, and that the special administrative region would now have to rely on mass-market gamblers instead of high-rollers.

Casino operators in Macau have recorded historic losses since the onset of the pandemic as China's quarantine requirements have made it too costly for most mainland tourists to travel there.

The Macau units for US casino operators Sands, MGM and Wynn each saw revenue plummet roughly 80 per cent last year, and the sector will now also have to contend with the potential threat to tourism posed by the new coronavirus variant Omicron.

Trading in Suncity Group, which has a market valuation of HK$1.7 billion (S$298 million), was suspended yesterday. The stock has plunged 165 per cent this year.

Before the Covid-19 pandemic, Macau's government obtained more than 80 per cent of its tax revenues from the gambling industry, which employed about three-quarters of the territory's 600,000 population, either directly or indirectly.

REUTERS