Macau’s current policy environment poses a potential threat to 2017 gross gaming revenue growth in the city’s casino sector, says Japanese brokerage Daiwa Securities Group Inc.
“To us, the prevailing policy environment will not only have a broader impact on overall gaming patron sentiment, but also poses an overhang to the Street’s widely-expected growth trajectory in 2017, which has seen significant upward revisions over the past two to three months,” analysts Jamie Soo, Adrian Chan and Jennifer Wu wrote in a Thursday note.
The Daiwa team made reference to the Macau government’s 2017 policy address, presented last November, which included measures to curb the use of illegally-modified handheld China UnionPay Co Ltd card payment terminals. Such devices have reportedly been used in order to supply visitors from mainland China with finance for gambling in Macau.
Mainland visitors to Macau are only allowed to take a daily limit of RMB20,000 (US$2,985) in cash when crossing the border. Mainland residents gambling in Macau have routinely got around this restriction by purchasing items from one of Macau’s pawnshops or jewellery stores using their UnionPay cards, immediately returning the items in exchange for cash – a process that is not illegal under Macau law. The retailer involved usually charges gamblers a fee under that system.
Daiwa’s note was published after the Judiciary Police and Monetary Authority of Macau jointly conducted last week raids against the suspected use of illegally-modified handheld UnionPay card payment terminals. The police arrested 23 people – connected to eight shops – suspected of committing computer fraud and being involved in organised crime.
The brokerage also mentioned the tightening of rules on large-sum, suspicious, and cross-border transactions in mainland China – as announced by the country’s central bank at the end of last month – as another potential negative event for Macau’s gaming sector.
“The Street [investment community] appears to have continued to overlook the broader gaming-related policy tightening guidance as set forth by the chief executive’s policy address, a number of which were not present in past policy addresses,” the Daiwa team wrote.
It added: “We find it increasingly difficult to justify the Street’s high level of GGR growth expectations for 2017 of 10 percent to 16 percent year-on-year (versus our forecast of 4 percent), especially given the looming incremental policy tightening including those related to money flows from China.”
There was consecutive year-on-year positive growth in Macau monthly GGR in the final five months of 2016 confirmed the data for December and full-year 2016 released earlier this month by the city’s gaming regulator.
Brokerage Sanford C. Bernstein Ltd stated in a January 3 note that Macau’s casino gambling market could in 2017 register the first year-on-year positive growth in GGR since 2013. The institution forecast overall growth could amount to 8 percent, with 12 percent to 14 percent expansion in the mass gambling segmen;, and 2 percent to 4 percent improvement in VIP GGR.
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VIP casino gross gaming revenue in Macau in the third quarter of 2017