Given its spare funds, Jockey Club cries crocodile tears over Macau The Hong Kong Jockey Club - the grand and generous outfit that it is - often makes the case that local horse racing is suffering because of competition from Macau's casinos, and restrictions on racing should be relaxed as a result.
This argument is a bit rich, on two fronts. The first and most obvious is that racetracks almost always lose out to casinos. The lesson from gaming jurisdictions worldwide is that the introduction of casinos near a horse-racing operation tends to result in the casinos capturing a large portion of the local gambling dollar.
Indeed, many overseas jurisdictions have let their racetracks install up to several thousand slot machines so they can stay competitive.
The Jockey Club isn't pushing for permission to install slot machines - not yet. That is because it doesn't need to.
Contrary to what might be suggested by all the noise about Macau casinos spelling doom for local racing, the club has seen betting volumes on horse racing grow in recent years (see first chart). The club's rake, which refers to the percentage of overall wages kept by the club after winning bets and rebates have been paid out, stood at about 17 per cent. Despite the financial crisis, a deep local recession and rising unemployment, wagers on horse racing slipped only 1.3 per cent in the 12 months to June, after two years of significant growth.
This doesn't mean that Macau's casinos are not a threat. They are; this will become more evident in the long run.
Instead, horse racing's turnaround in recent years has more to do with the club taking market share from illegal bookmakers. Since 2006, the club has been offering rebates on losses to high rollers wagering more than HK$10,000, which has given it a competitive boost against underground sports books.
This coupled with strong growth in soccer-betting revenue has helped the club amass a not-so-small war chest.
The club published its annual report this week and attention has rightly focused on the HK$1.1 billion deficit it booked as a direct result of mainly unrealised investment losses from the financial crisis. That compares with a net financial surplus of HK$1.2 billion a year earlier.
Combined balances in the reserve account, and the contingency and development funds shrank 9.8 per cent to HK$27.59 billion in the year to June, down from HK$30.58 billion a year earlier.
But that is still a very large amount of money indeed. Broken down, the purpose of the development fund is to finance future club facilities while the contingency fund, as the name implies, is dedicated to unforeseen circumstances.
But All In is at pains to figure out what is to be done with the HK$17.23 billion in the club's reserve account. The annual report says only that reserves consist of surplus funds above and beyond operational requirements, which are to be invested 'for capital appreciation over the medium to long term'.
Most are aware that the club is Hong Kong's biggest single taxpayer and gives billions to charity each year. But All In still has to wonder: what on earth are they going to do with all that leftover money?