Wealth Blog

Crackdown on Chinese officials likely to dent Macau casinos

PUBLISHED : Wednesday, 22 May, 2013, 12:59am
UPDATED : Wednesday, 22 May, 2013, 1:27am


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It all gets very murky when the lethal cocktail of wealthy mainland gamblers is mixed with Macau casinos and huge debts. In Yang Kun’s case, it seems banking and gambling were a disastrous mix.

Week in China reports that Yang, a former vice president at Agricultural Bank of China, was detained last April accused of making improper loans. It now seems perhaps the cash was actually used to pay off 3 billion yuan (HK$3,76 billion) of Macau casino debts. Yang is still helping the authorities with their inquiries.

After nearly 30 years toiling for Agricultural Bank, eventually taking charge of its property loans division, Yang is also the most senior banking official to be arrested since Zhang Enzhao, president of China Construction Bank, in 2006. And as WIC points out, for the moment, he is one of the highest profile catches for Xi Jinping’s campaign against official corruption. But will Yang turn out to be an isolated case or the first of many VIP arrests in the former Portuguese enclave?

Crackdown could benefit Hong Kong property

By the end of April, Macau’s casinos had generated more cash than the US gambling state of Nevadav for the whole of 2012. Macau’s first quarter revenues were up 14.8 per cent year-on-year. Macau declared US$38 billion (HK$295 billion) in gaming revenue last year: more than six times the Las Vegas tally.

Admittedly, gambling revenue in April fell slightly from the month before, WIC notes. But that followed a new monthly record in March, with casinos collecting a further US$3.92 billion (HK$30.4 billion).

But what does the future hold for Macau? Analysts predict a 15 per cent revenue growth this year, based on greater confidence in the Chinese economy and additional hotel rooms and tables in Macau. Sands China last week announced quarterly earnings gaining 63 per cent to US$453 million, boosted by the opening of the Sands Cotai Central resort last year.

After the financial crisis setback, Macau made a healthy recovery. Hotel occupancy rates are 95 per cent and the average minimum table bet is HK$600 or about US$77 - double what it was during the financial crisis.

But now rumours about a squeeze on junkets and high rollers with official mainland connections are surfacing again. Bo Xilai brought Macau into the spotlight when stories circulated in the Chinese media that bosses at a Macau junket had been questioned about money-laundering by Bo and his cronies. Week in China thinks that these events might even be linked to the case against Yang, supposedly being investigated for his relationship with two other individuals close to the former Chongqing Party boss.

Then in November came Xi and his crackdown against official snouts in the trough. At the time, Macau wasn’t specifically mentioned, but in February reports circulated that something was about to happen. The news rippled through the gaming halls, causing Macau’s casino stocks to check sharply. But nothing actually happened, and everyone breathed a sigh of relief and carried on.

Now, word on the street is that Xi really is about to announce a serious clampdown on mainland officials coming to Macau. Well-informed sources tell me we can expect them to be banned from visiting Macau for the foreseeable future, starting from July 1 - or perhaps even a month earlier.

If this happens, presumably Macau’s roller coaster fortunes will dip again, once the lid on the laundry basket is closed. That creates a conundrum. Where to take the money for a spot of dry cleaning? Well, as the choices narrow, (mainland property dealing at home is becoming increasingly tricky as restrictions bite) - Hong Kong property still looks inviting, as one of the dogs with the fewest fleas in this game. Watch this space.