Macau | “Investor panic” in Macau after Hainan ‘gaming’ talks not justified – brokerage

Brokerage Union Gaming claims plans for offering cashless gaming at 'entertainment bars' in Hainan will not have an impact in Macau, despite the recent 3.7 pct stock plunge of local casino operators

Macau (MNA) – Casino operators in Macau were collectively down 3.7 per cent on the Hong Kong Stock Exchange on Tuesday – equivalent to a US$4.3 billion (MOP34.76 billion) loss in market capitalisation – after news spread that resorts in Hainan could soon be operating forms of cashless gaming, a note from Union Gaming stated.

Speaking to Macau News Agency (MNA), Grant Govertsen, Managing Director, Head of Asia Equity Research of Union Gaming, said that there “was clearly an amount of investor panic [on Tuesday] in regards to the Macau operators.”

The operations in question in the resorts in Sanya, a city on Hainan Island, named entertainment rooms or bars, consist of facilities where customers can bet real money on games such as baccarat but can only collect winnings in the form of points or prizes and resort amenities.

According to the brokerage, the changes followed the recent publication of a verdict in a four-year old court case concerning the Mangrove Resort, located on the island, which had operated such an entertainment facility that was then closed by the police.

The court ruling allows prize-oriented table games for entertainment purposes only and is low stakes, which does not contradict the constitution.

In the note, the brokerage reiterated that Hainan currently ‘represents no threat to Macau from virtually any point of view,’ be it in regard to ‘quality, scale, amenities, culture, experience, luxury, customer service, and most importantly, true gambling.’

‘As we noted in April, even if true casino gambling was legalised in Hainan the risk to Macau’s Big 6 is negligible,’ the note reads.

Union Gaming believes there would likely be no measurable impact upon mass market gross gaming revenue as mass is convenience based, arguing Hainan is ‘simply not convenient’ for virtually all of Macau’s mass customers.

‘The primary risk is therefore within the VIP segment,’ said the brokerage, although the impact would be limited, ‘as any expansion would probably be limited to one or two casinos vs. Macau’s 40.’

China’s government has, however, made it clear that there are ‘no plans to allow full-fledged casino gambling in Hainan as casinos remain forbidden per the constitution.’

‘Keep in mind that as part of the anti-corruption campaign the government made it a point that officials shouldn’t even play mahjong given its gambling characteristics,’ the note stated.

The fuss about the prospect of legalising gaming in Hainan – which Union Gaming still believes remains low – started in April, when proposals for the exploration of games such as horse racing (with no wagering) and lotteries, mulled for revitalising the island’s economy, have engendered speculation about casinos ultimately being introduced on the resort island.