Hong Kong stocks fall as Macau casinos take a hit from Crown Resorts arrests

Hang Seng Index closed down 0.8 per at 23,037.54, while Hang Seng China Enterprises Index was off 0.6 per cent at 9,541.08

PUBLISHED : Monday, 17 October, 2016, 7:46pm
UPDATED : Monday, 17 October, 2016, 11:18pm

Hong Kong stocks closed lower on Monday, dragged down by Macau casino shares after the arrests of 18 employees of Australia’s Crown Resorts in China.

The benchmark Hang Seng Index deepened its afternoon losses and closed down 0.8 per cent or 195.77 points at 23,037.54. The Hang Seng China Enterprises Index, known as the H-shares index, was off 0.6 per cent or 60.32 points at 9,541.08.

Macau gambling stocks were a big drag, after the Chinese authorities detained 18 members of staff of Crown Resorts, in which billionaire James Packer has a 53 per cent stake. Those detained include Jason O’Connor, head of the company’s VIP International team.

China didn’t reveal the reasons for the arrests, but a Reuters report, quoting a statement from China’s Foreign Ministry, said the detainees were suspected of “gambling crimes.”

“The recent detaining of overseas casino marketing staff could push casinos to rely on junkets against using a direct route to grow their VIP business, which could compress margins in the medium term,” said Praveen Choudhary, an analyst for Morgan Stanley.

“This could also ebb aggressive VIP growth seen in regional casinos at the expense of Macau.”

Sydney-listed Crown Resorts dived 14 per cent on Monday, sending a shock wave across the sector in Asian markets. Hong Kong-traded gaming stocks tumbled, with Galaxy Entertainment down 4.2 per cent to HK$29.3 and Sands China falling 3.3 per cent to HK$33.85. Melco International Development, which has a joint venture with Crown Resorts in Macau, slumped 7.1 per cent to HK$9.55.

Stocks in Hong Kong were not helped by losses on the mainland markets triggered in late trading by a dramatic 6 per cent plunge in Shanghai’s B share index.

Haitong International sales trader Andrew Sullivan said he expected the market to drift lower as investors exercise caution ahead of a barrage of crucial Chinese data, including GDP numbers on Wednesday and yuan loan figures later in the week.

Ben Kwong Man-bun, a director of brokerage KGI, said the market had performed well in the third quarter and has now entered a correction mode. He too expected traders to stay on the sidelines as they wait for fresh economic data from the US and China this week.

Birmingham International, which resumed trading today after a suspension of almost two years, was the biggest loser on the Hong Kong bourse, dropping a dramatic 50.54 per cent to close at 46 cents.

The company, which owns the English football club Birmingham City, resumed trading after a major financial restructuring and the appointment of a new board of directors.