Macau (MNA) – Analysts from Sanford C. Bernstein indicated on Friday that new foreign currency transactions regulations implemented by the Chinese central government could have an impact in Macau, although it the real impact will only be discernible in latter stages.
On January 31, the Chinese Supreme People’s Court and the Supreme People’s Procuratorate issued a judicial interpretation of laws regulating certain foreign currency transactions.
‘But the reality is that this was largely the case already. For example, it has always been technically illegal to have pools of capital that match sellers and buyers of RMB – the backbone of underground banks. The new rules largely seem to highlight that these types of activities are not allowed and will be prosecuted,’ a Bernstein note today indicated.
Nevertheless, Bernstein analysts still considered that the new rules provided law enforcement with more tools to work with in targeting activity largely operating outside the law.
‘It is too early to say at this stage what the impact on Macau may be. If the rules are all strictly enforced and the scope of government action against all forms of money movement is deep and broad, the impact would be severe, not only for Macau, but for the Hong Kong real estate market and for many Chinese companies that shift funds offshore.’ the note indicated.
According to Bernstein, contacts with local junket operators have not revealed any impact to the local VIP promoter sector, with no meaningful disruption in money flows.
‘There are likely some smaller junkets and agents that may be impacted if their avenues of money movement get locked down. The view from the large junkets is they are broad enough with numerous channels where creative mechanisms are always in play,’ the note states.
However the brokerage considered that if a severe clampdown was to happen there could be a ‘perverse incentive’ to shift to more under the table betting which would negatively impact VIP gross gaming revenues in Macau.
‘A lot of this settlement already is done in RMB in China rather than offshore in Macau and other locations. Another impact could be greater further consolidation among the junket entities to create larger more diversified capital bases,’ Bernstein indicated
