Anti-corruption campaign Phase II likely to hit Macau

A new headwind is en route to Macau as China announces a second wave in its anti-corruption campaign. This time using the collaboration of the country’s telecom companies to target officials who have fled overseas. The new drive is likely to put added pressure on the local gaming industry, the VIP segment and junket business, in particular. Macau casinos make more than half of their revenues from high rollers. As the anti-graft campaign activity and the number of cases investigated has seemed to slow in recent months, this second push in the crackdown on corruption will surely send shockwaves through Macau. The Central Commission for Discipline Inspection (CCDI) has announced a new round of inspections, targeting again high profile public companies and institutions in China. The People’s Daily newspaper, the Ministry of Transport and China Eastern Airlines are some of the targets. But the most worrying factor regarding Macau is the CCDI’s goal to harness the technology of three of China’s largest telecom companies – China Mobile, China Unicom and China Telecom – to track down state officials and Communist Party members accused of corruption that have gone overseas. This collaboration is likely to put some high rollers in an even lower profile mood, probably gambling less or sidestepping the city altogether. Investors see the impact of Beijing’s anti-graft move as one of the main reasons for the gaming revenues plunge here in the last year. VIP demand has been heavily hit but as Deutsche Bank said in a recent report “an unheralded aspect is the impact felt on the junket system as currency movements have become considerably more difficult”. Another investment house, Wells Fargo, underlined the case of Macau casino junket operator Cheung Chi-tai – reportedly linked to the Neptune Group – who was arrested by Hong Kong police and accused of laundering HK$1.8 billion as an example of the new push. According to official data, since 2014 China has investigated 63,000 corruption cases, involving 85,000 officials. More than 33,000 officials were disciplined from January 2014 to May this year. Deutsche Bank notes that while the number of investigations slowed in the first five months of the year compared to the same period in 2014 (a drop of 37 per cent to 10,739) , the number of officials disciplined has picked up (a 32 per cent increase to 8,404). L.G.