Macau casino stocks suffer US$5.5 billion sell-off as China’s gambling crackdown snares junket boss
- Alvin Chau, head of Macau casino junket operator Suncity Group, arrested along with 10 others as authorities investigate a cross-border gambling syndicate
- Sun Entertainment Group, a filmmaker and funeral services provider controlled by Chau, fell by as much as 62 per cent in intraday trading
Macau casino stocks tumbled, erasing US$5.5 billion of market value in Hong Kong, as the arrest of the head of the biggest junket operator in the gambling hub revived concerns about Beijing’s increased scrutiny of the industry.
Sands China and Galaxy Entertainment Group, the two gaming stocks on the benchmark Hang Seng Index, dropped at least 7 per cent on Monday, extending a sell-off on Friday. MGM China sank 12 per cent. The losses were much wider than the index’s 1 per cent decline.
An index tracking six casino stocks plunged 8.6 per cent on Monday, set for its biggest slide since September 15, when Macau issued a draft on the overhaul of the gambling industry. Today’s sell-off erased about US$5.5 billion, almost one-third of the September losses in the concessionaires.
Local authorities arrested Alvin Chau Cheok-wa and 10 others over the weekend. The alleged crime syndicate, comprising 199 shareholder-level representatives and more than 12,000 agents led by Chau, had developed a network of more than 80,000 mainland punters, according to authorities in China’s eastern city of Wenzhou.
Chau, 47, is the CEO of Suncity group in Macau, the largest junket operator he founded in 2007. Junket operators are go-betweens who bring high rollers to casinos, extending them credit and collecting interest on their debts.
Suncity Group Holdings, a Hong Kong-listed resort operator controlled by Chau, was halted from trading in Hong Kong on Monday. Summit Ascent, which operates casino in Russia, was also halted.
Sun Entertainment Group, a filmmaker and funeral services provider listed in Hong Kong stock exchange’s board for smaller growth companies, tumbled by as much as 63 per cent. It recently traded 25 per cent lower.
“The board wishes to emphasis[e] that the news coverage is relating to the personal affairs of Mr Chau,” Sun Entertainment said in a filing late Sunday. “The board is of the view that the incident does not have any material impact on the financial position, business nor operation of the group.”
This is the second time this year that Macau’s casino stocks have been walloped by the regulatory crackdown. In September, some US$17 billion in market capitalisation was wiped out from the gaming stocks in a single day after the former Portuguese colony unveiled a draft to tighten the grip on the sector, including the appointment of government representatives.
Chau’s arrest is a fresh reminder to investors that Macau’s gambling industry, which contributes to about 80 per cent of the city’s tax revenue, still remains a focus for Beijing’s top leaders. The casinos have been blamed for money laundering and capital flight.
Beijing has been trying to reduce Macau’s reliance on the industry. Under the Greater Bay Area scheme, it aims to transform the city’s economy into a world-class leisure centre and a commerce and trade cooperation service platform.
Authors: Enoch Yiu, Zhang Shidong, SCMP