New China card cash rules unlikely to hurt Macau: analyst
A new annual CNY100,000- (US$15,366-) limit on the aggregate amount of money people can withdraw from their mainland Chinese bank accounts while overseas – that reportedly took effect on Monday – is “unlikely to have a material impact on Macau,” said a note that day from brokerage Union Gaming Securities Asia Ltd.
But a Tuesday note from brokerage Sanford C. Bernstein Ltd said – referring to a segment of mass-market casino customers betting in high multiples but in cash – that the new limit on personal withdrawals via automated teller machines (ATMs) “could have some impact” on Macau mass-market gambling, “as well as the lower end of premium [mass]”.
Previous modification of “overseas” cash withdrawal rules for mainland Chinese bank accounts have also covered transactions made via Macau, a special administrative region of the People’s Republic of China.
China’s State Administration of Foreign Exchange announced the annual limit in a statement released on Saturday, clarifying that it applied no matter how many bank cards or accounts an individual had.
Under the old rules, there was an ATM annual withdrawal cap of CNY100,000 per bank card, but no rules to stop people having multiple cards attached to a single account or multiple accounts with different banks.
“People should not borrow other people’s bank cards or lend them to others to help get around the [new] regulation,” Saturday’s official statement said.
“International experiences have shown that large cash transactions are often associated with criminal activities such as fraud, gambling, money laundering and terrorism financing,” the foreign exchange regulator added.
Grant Govertsen, an analyst at Union Gaming, said in his Monday memo, explaining why he thought the new rules would not hurt Macau casino gross gaming revenue (GGR): “First, the limit of circa US$15,000 per individual per year (rather than per account per year) would only potentially impact premium mass players given that lower-tier mass players average annual theoretical GGR contributions are lower than US$15,000 and that VIP players are playing on credit.”
He added: “Second, it is quite likely that many premium mass players have established overseas bank accounts already, which would not be impacted by domestic bank card restrictions.”
Mr Govertsen further noted: ”Third, we believe that using bank cards to withdraw cash from ATMs has always been more of a last-choice option anyway…”
Referring to the stocks of Macau casino operators, Union Gaming stated: “Historically the Macau names have typically sold off on news of bank card restrictions – representing buying opportunities – even though none have seemed to have had a measurable impact on the market (e.g. previous iteration of annual CNY100,000 withdrawal limit, previous lowering of daily [Macau] withdrawal limit, previous implementation of facial recognition/ID checking, previous targeting of mobile UnionPay terminals).”
Sanford Bernstein analysts Vitaly Umansky, Zhen Gong and Cathy Huang said in their memo: “Overall, the new policies may portend further capital controls to come in 2018. We would continue to caution that the possibility of further capital control restrictions/scrutiny may be forthcoming (although they may not be directed specifically at Macau).”
The current cap on daily withdrawals via mainland China bank cards remains unchanged at CNY10,000 per card.
Mainlanders can change per year up to US$50,000 worth of Chinese currency into foreign currency.
Sanford Bernstein stated in its Tuesday note: “According to feedback in our 2017 China Premium Consumer Usage and Attitudes Survey, over 40 percent of Macau gaming respondents withdraw cash from ATMs using China UnionPay cards.”
A September memo from banking group Morgan Stanley – citing proprietary research – suggested use of China UnionPay Co Ltd cards for cash as a source of gambling funds in the Macau market had increased and would pose a risk to the premium mass segment from a gaming operator’s standpoint, were further cash withdrawal restrictions to be introduced by regulators. The investment bank’s memo was based on a survey of 1,000 Chinese gamblers, conducted by AlphaWise, a research unit of Morgan Stanley.
DS Kim and Sean Zhuang, analysts at JP Morgan Securities (Asia Pacific) Ltd, said in a Tuesday note regarding the new ATM annual withdrawal limits: “This measure only applies to the outright cash withdrawal from overseas ATMs, and it has nothing to do with overseas credit/debit card usage i.e., UnionPay transactions at the pawnshops (a.k.a. cash-back transaction in Macau) are still allowed as-is.”
(Updated 11.15am, Jan 2)
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