The bad news for James Packer's gaming empire, Crown Resorts, just keeps coming, with the company's share price falling as much as 8 per cent on Friday amid concerns gamblers in Macau may soon have less cash to splurge.
Crown's local stock decline mirrored a plunge in US casino shares overnight after the South China Morning Post reported that China is imposing a 50 per cent cut on one bank's ATM withdrawal limits in Macau, the world's largest casino market.
The cap at UnionPay, taking effect on Saturday, reduces the limit to 5000 patacas ($840), the newspaper reported.
Shares of Las Vegas Sands Corp dropped 13 per cent in US trading, Wynn Resorts fell 11 per cent and MGM Resorts International sank 4.3 per cent.
US-listed shares of Crown's casino venture in Macau, Melco Crown Entertainment, plunged 14 per cent. Crown, which owns about 27 per cent of the business, was trading 6.2 per cent lower at $11.30 as of 11.45 am in Sydney.
The market rout has underscored Macau's importance to the global gaming industry. New rules on ATM cash would extend China's tightening of capital controls as depreciation pressure builds on the yuan.
The measures have included a pause on some foreign acquisitions and higher administrative hurdles to taking yuan overseas, people familiar with the steps have told Bloomberg News.
The news "came out of nowhere," said Steven Wieczynski, an analyst at Stifel Nicolaus & Co.
UnionPay doesn't likely account for a "significant" amount of the bets placed in Macau, "certainly not to levels implied by the sell-off", he said in a research note on Thursday.
The Macau Monetary Authority's limit on withdrawals in Macau is designed to further tighten rules on the use of China UnionPay cards, the Morning Post said. Law enforcement officials have scrutinised UnionPay transactions as a way for people to illegally take cash out of China.
The development strikes a blow to casino operators just as the Chinese betting enclave of Macau was starting to recover.
Betting in the world's largest gambling market, the only part of China where casino gambling is legal, had risen for the past three months, emerging from a two-year slump. Almost a million Chinese tourists visited Macau in the first seven days of October for Golden Week, the most in at least a decade.
Series of restrictions
Macau's government began restricting UnionPay debit cards in 2014, ordering jewellery 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.
Melco Crown, run by casino heir Lawrence Ho, opened its $4 billion Batman-themed Studio City casino in October last year, followed by Steve Wynn's $US4.2 billion Wynn Palace in August. Sheldon Adelson's Las Vegas Sands opened the $US2.9 billion Parisian Macau in September, and MGM is planning to open the $US3.1 billion MGM Cotai next year.
The Chinese government, too, is investing heavily in the region, including a new bridge from Hong Kong and a light-rail system, said Dan Wasiolek, an analyst at Morningstar in Chicago. The withdrawal restrictions may be part of an overall strategy of holding down tourism until those projects are completed, he said.
"I don't think this is going to hinder the long-term outlook," Wasiolek said in an interview. "The government wants Macau to be a worldwide destination. They just want to make sure the growth comes in a controlled fashion."
For Crown, the latest setback comes after 18 employees and people working for the company, including four Australians, were detained in a series of coordinated police raids across mainland China in mid-October for alleged "gambling crimes". It is illegal to promote or organise gambling activities on mainland China.
Profit from Crown's casino investments in Macau have tumbled by almost two-thirds in the past financial year, dragging down its overall performance.
Bloomberg with BusinessDay
