GGRAsia – Crackdown on flow of funds to Macau not new: analyst

Crackdown on flow of funds to Macau not new: analyst

Dec 17, 2014 Newsdesk Latest News, Macau, Top of the deck

Macau casino stocks on Wednesday slumped in Hong Kong trading after the South China Morning Post reported China would intensify the crackdown on illicit money channelled to Macau. Analysts at Credit Suisse AG however say they do not see this as a step up in scrutiny.

The security drive will see mainland China’s Ministry of Public Security play a leading role, the Hong Kong daily reported on Wednesday, citing documents it saw confirming the government’s action and which it said were sent to Macau’s banks late on Tuesday.

“We checked with several sources including banks, pawnshops and casinos, none of them has heard of the notice and the new measures,” Hong Kong-based analysts Kenneth Fong and Isis Wong wrote in a note on Wednesday.

“One of the Macau-based Chinese bank management we talked to said he has not received such a notice from the Monetary Authority of Macau,” the Credit Suisse analysts added.

A top executive of one of the city’s financial institutions told GGRAsia that the bank had not received any notice from Macau’s financial regulator. “Even if they issue a new notice, that would likely be to reiterate what they have already said,” the person told us.

In late November, the Monetary Authority of Macau hosted a meeting aimed at strengthening cooperation among government departments and financial institutions in Macau and mainland China. Representatives of China’s Ministry of Public Security and of UnionPay International attended the meeting, according to a press release from the Monetary Authority.

The exchange of views focused on cross-border criminal activities related to the use of mainland bank cards and point-of-sales machines, said the statement.

The Monetary Authority on Wednesday told GGRAsia it had “no supplementary information” to provide on cross-border initiatives to crackdown on illicit money flows from mainland China to Macau.

Galaxy Entertainment Group Ltd fell 8.20 percent to close at HKD42.0 (US$5.4) in Hong Kong trading. MGM China Holdings Ltd dropped 7.00 percent and Sands China Ltd lost 6.18 percent. SJM Holdings Ltd was down 6.17 percent to HKD11.6, Wynn Macau Ltd fell 4.30 percent and Melco Crown Entertainment Ltd dropped 3.86 percent.

Hong Kong’s benchmark Hang Seng Index was off 0.37 percent.

New measures unlikely

The report from SCMP said the new security drive would give the Public Security Ministry’s Economic Crimes Investigation Bureau electronic access to all transfers through the state-backed China UnionPay bank payment card system to identify suspicious transactions.

Mr Fong and Ms Wong said they believe the chance for any new measures against UnionPay “is low”.

The Macau government took action earlier this year to restrict illicit money flows into the city through unregistered China UnionPay Co Ltd terminals.

“UnionPay is a form of China debt card. As such, all the UnionPay transactions should already be recorded in both China and Macau banks. We believe that if the China authority wants to monitor suspicious transactions, they don’t need to involve the Monetary Authority of Macau as stated in the news article,” said the Credit Suisse team.

It added: “For transactions going through UnionPay, pawnshops will normally charge a 3 percent to 5 percent [fee]. As such, UnionPay is an expensive way to transfer a large amount of money out of China. Most of Macau VIPs … normally use credit [that] junkets extend to gamble instead of transferring physical cash through UnionPay. This is the same case for high-end premium mass players.”

Macau gross gaming revenue (GGR) has dropped every month since June in year-on-year terms. Some analysts believe the December numbers could eclipse October’s 23.2 percent drop and it is already expected that the city will suffer this year its first-ever annual GGR decline since the casino liberalisation in 2002.

The decline in GGR is taking a toll on the government coffers. The Macau government on Tuesday said total revenue for the first 11 months of 2014 reached MOP145.7 billion (US$18.2 billion), an increase of 1.9 percent from a year earlier. Over the past four full calendar years, the year-on-year increase in revenue has varied between 14.9 percent and 41.5 percent.

The government collected a total of MOP120.2 billion in direct taxes from gaming in the January to November period, already 2.0 percent above what it had forecast for the full year.

The government’s fiscal surplus however is down 4.3 percent in the calendar year to November 30 compared to the prior-year period, said the territory’s Financial Services Bureau.