The big Macau casino scare turned out to be a nothingburger. Shares of Wynn Resorts (NASDAQ: WYNN), Las Vegas Sands (NYSE: LVS) and Melco Crown Entertainment (NASDAQ: MPEL) plunged late last week after the South China Morning Post said Beijing had further clamped down on capital outflows from the gambling enclave by halving the amount of money per transaction that could be withdrawn from ATMs there by UnionPay cardholders, but the reality was less draconian than it first appeared.
Just as the only locale in China where it’s legal to gamble has been getting back to growth after 26 months of declining year-over-year gaming revenues, the possibility that Beijing was cracking down again on the ability of VIP gamblers to gain access to money sent casino stocks tumbling.
The Morning Post said the move was in reaction to “illicit money movers” who would stand at ATMs with China UnionPay cards withdrawing money 10,000 patacas ($1,250) at a time (patacas are the local currency). UnionPay is a Chinese financial services firm that is also the only interbank network in China that links the ATMs of all banks throughout the country. It was recently discovered that as much as 10 billion patacas had been withdrawn at UnionPay ATMs in Macau — and from there, moved out of the country — in one month alone. The move cut the amount that could be withdrawn to just 5,000 patacas.
However, while the withdrawal limits were reduced, it was only on a per-transaction basis. The effect was simply that individuals would have to make two transactions to access their money. When the fuller picture emerged, Wynn, Sands, and Melco Crown all rebounded.
While the scare seems to have passed, maybe the casinos should still worry a little. This rule cahnge shows that Beijing still has Macau in its sights, that it remains concerned about capital outflows from China through the gambling enclave, and that it’s willing to take measures to address the problem.
When China first cracked down on corruption, luxury, and expensive gift-giving to officials three years ago, it set off a collapse in gaming revenues as high rollers retreated to avoid being a target of government officials. That Beijing has shone a spotlight on the peninsula once again may have a similar impact even if the practical result of its actions this time were relatively benign.
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Rich Duprey has no position in any stocks mentioned.
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