Beijing’s anti-corruption office bad news for Macau: analyst
Beijing’s plans to set a new anti-corruption office will likely delay any recovery in the VIP casino segment in Macau, says consultancy Union Gaming Research Macau Ltd.
Official news agency Xinhua reported over the weekend that China’s central government is in the process of setting up a new high-level anti-corruption office. The new body will be run by a top prosecutor under the Supreme People’s Procuratorate.
A note by Union Gaming analysts Grant Govertsen and Felicity Chiang published on Monday said the move “represents the institutionalisation of the anti-corruption drive”. That, in turn, suggests “the anti-corruption drive is far from over and is likely to continue to impair Macau’s VIP market for a significant period of time,” Mr Govertsen and Ms Chiang wrote.
A late-September report by Xinhua news agency that Beijing would wind down an anti-corruption drive within the ruling Communist Party had led some investors to believe that the corruption crackdown was ending. But Wells Fargo Securities LLC already warned at the time that an increase in the anti-corruption drive was possible in the near future.
Monday’s note by Union Gaming added: “The greater number of human resources allocated to this [new anti-corruption office] indicates that the number of cases that are prosecuted could continue to grow. This could in turn delay a VIP recovery in Macau, or could represent another leg down with respect to VIP trends should prosecutions escalate materially (in terms of the number of prosecutions or the status of those being prosecuted), which could cause a broader group of VIP customers to lay low.”
Recent reports have suggested that the corruption crackdown in mainland China is likely to be the main driver of the decline in gross gaming revenue (GGR) in Macau since June due to its apparent depressive effect on demand for VIP gambling. Macau GGR could show a year-on-year fall of 21 percent for October when official numbers are released on Tuesday, suggest several investment analysts.
The Union Gaming analysts say that the likely beneficiaries of the anti-corruption drive in mainland China will be other regional jurisdictions, in particular Cambodia, Philippines and South Korea.
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