Macau’s casino stocks were all down at close on Thursday following news this week that authorities have embarked on a new crackdown on the use of Union Pay cards by removing Union Pay POS terminals from pawnshops inside a number of Cotai integrated resorts.
The Monetary Authority of Macao confirmed the crackdown late Wednesday, issuing a warning for “all financial institutions to establish sound risk management for the provision of any authorized financial services” and threatening merchants with the loss of their “business relationship” with local banks.
The news saw stocks of all six Macau concessionaires down at close on Thursday night, with Melco Resorts & Entertainment taking the biggest hit – down 9.1% to US$29.36 from $32.31 at close on Tuesday, the night before news of the Union Pay crackdown broke.
SJM Holdings fell 4.7% to HK$10.54, with MGM China down 4.5% to HK$21.00 and Wynn Macau down 4.1% to HK$27.75.
Galaxy Entertainment Group fell HK$1.85 from Tuesday levels to HK$64.95 while Sands China suffered the smallest loss, down 0.8% to HK$44.90.
The market response comes as brokerage Sanford C Bernstein warned that the crackdown could hit Macau’s Premium Mass market with around 25% of Premium Mass play relying on Union Pay for access to funds.
“While Union Pay cash out (pawnshops) are not used by many customers, it is important source of liquidity for some premium customers,” Bernstein analysts said in a Thursday note. “While a full ban on pawnshops will have an impact on GGR, a portion of the liquidity will likely be funded via other means (but near term impact would be evident).”
Notably, Melco Resorts is set to open its new luxury hotel Morpheus next week which is targeted specifically at the Premium Mass segment.
Bernstein also observed that the Union Pay crackdown could indicate a renewed push by China to tighten capital outflow controls.
“China’s central bank and the Ministry of Security announced this week that they would be enhancing their joint efforts and working to crackdown on illegal f/x transactions, improper financial transactions via the internet and underground banks,” the brokerage said.
“The coordinated effort is focused on reducing shady financial transactions that occur with no government oversight or transparency. The recent actions in Macau may be part of the broader China government strategy and if so, could lead to greater regulatory crackdowns.”
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