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China clamps down on foreign casinos wooing Chinese gamblers

Friday, February 6, 2015 - 17:58
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China is starting a crackdown to stop foreign casinos from luring its citizens to gamble overseas, as the government extends its campaign against corruption that's already prompted high-stakes gamblers to avoid Macau.

[BEIJING] China is starting a crackdown to stop foreign casinos from luring its citizens to gamble overseas, as the government extends its campaign against corruption that's already prompted high-stakes gamblers to avoid Macau.

The authorities will focus its assault on casino operators from neighboring countries that have set up offices "to attract and recruit Chinese citizens" to gamble abroad, Hua Jingfeng, a deputy director at China's Ministry of Public Security, said at a briefing held in Beijing on Friday.

Galaxy Entertainment Group Ltd led gains among Macau casino shares after news of the crackdown, jumping 7.1 per cent by the close of trading in Hong Kong for its biggest rise since April 2014. While shares reacted positively on the anticipation players would return to Macau from overseas casinos, the overall tone is still negative, Credit Suisse Group AG analysts said.

While marketing of gambling activities has generally not been allowed in China, "re-iteration of this anti-gambling by the official means we don't see little room near term for China to relax visa trends to Macau soon," Credit Suisse analysts led by Kenneth Fong wrote in a note.

Chinese President Xi Jinping's two-year battle against corruption and Macau's stricter travel rules have deterred high-stakes gamblers from entering Macau, the world's biggest gambling hub that relies on so-called VIPs for a majority of the city's revenue.

Some Chinese gamblers have instead opted for casinos in countries including the Philippines, South Korea, Vietnam, Cambodia, Australia and Singapore.

"Some foreign countries think of us as a big market, and we have already investigated a series of related cases," said Mr Hua, according to a People's Daily transcript of the briefing, where the ministry announced a wider clampdown on online gambling and prostitution.

Mr Hua, deputy director of the ministry's bureau of public security management, didn't specify the countries.

Wynn Macau Ltd closed 3.5 per cent higher, Sands China Ltd and Melco Crown Entertainment Ltd both gained 3.1 per cent, MGM China Holdings Ltd climbed 2.6 per cent, while SJM Holdings increased 1.4 per cent. Hong Kong's benchmark Hang Seng index closed down 0.4 per cent.

The crackdown on foreign casinos' representative offices won't impact existing gamblers, who already know those casinos, or on new VIP players, who're brought to them by junket operators, according to Mr Fong.

"Having a much stronger control over the casino representative office in China means this will make their job more difficult to find new players," Mr Fong said, adding that it will hit the recovery for new premium mass market players, referring to high-stakes bettors who don't rely on junkets for gambling loans.

NagaCorp Ltd, which has a casino in Cambodia, is trying to woo more higher-spending Chinese gamblers to its property by working with more Macau's junket operators, the middlemen who bring in Chinese high rollers for casinos, Chairman Timothy McNally said in an interview on Thursday.

The company is hiring more people in Macau and mainland China and working with travel agencies to draw more customers, McNally said. NagaCorp shares fell 0.34 per cent.

Echo Entertainment Group Ltd, operator of Sydney's only casino, is taking more bets by Chinese VIPs, Chief Executive Officer Matt Bekier said in an interview this week.

Macau junket operator David Group, which was closing three of its seven VIP rooms in the city amid the industry downturn, has said it is taking more wealthy customers beyond Macau to Asian centers with more relaxed visa approval process, such as Manila, Vietnam and South Korea.

Macau's government is stepping up regulations of the gambling industry, including tightening scrutiny on junket operators and the use of China UnionPay debit cards at casinos in Macau to obtain cash for gambling.

A hotel executive who's a nephew of casino tycoon and SJM Holdings Ltd founder Stanley Ho was arrested last month in the largest bust of a prostitution ring in the city's history, in a sign that Mr Xi's crackdown was expanding to include long-tolerated vices.

BLOOMBERG