Shares decline, then rally
Sheldon Adelson, chairman and CEO of the Las Vegas Sands Corp. and its Macau subsidiary, Sands China, may have lost up to $3 billion in net worth after rumors that the Chinese government would slash the amount of money that can be withdrawn from ATMs in Macau. The move is designed to keep Chinese high rollers from laundering money through the city’s casinos.
Not only did Adelson lose his own money, but his casinos in the Chinese territory lost 14 percent of their market cap in a single day, reported the Jewish Business News.
The rumors “sparked investor panic across the globe,” Forbes magazine reported, and sent other Macau casino stocks down as well. Wynn Resorts shares lost 11 percent of their value in the same period. Though the stocks rose later the same day, they fell again the day after.
To stem the losses, the Monetary Authority of Macau issued a memo clarifying that, while cash withdrawal limits for individuals with Chinese bank accounts would decrease per transaction, daily withdrawal caps would be unchanged.
“The measure is not expected to have any impact on day-to-day ATM cash withdrawals by Macau residents, nor will normal overseas cash withdrawals by mainland bank cardholders be affected,” the authority wrote in the announcement.
Secretary for Economy and Finance Lionel Leong Vai Tac said the withdrawal cap will stabilize Macau’s financial system, according to the Macau News. ATM withdrawals with bankcards issued in Mainland China are now limited to 5,000 patacas (US$625) per transaction, while daily withdrawals remain at 11,570 patacas ($1,448).
In a note, JP Morgan analysts said the change should have no “discernible impact on gaming demand or spend. Even with regards to player psychology, we don’t think such a change would be seen by gamblers as a sign of ‘capital control’ or ‘potential monitoring by the government.’”
Bernstein analysts agreed that “the effect of this new change would have no material impact on Macau GGR,” at least for now.
MGM Resorts CEO Jim Murren downplayed the incident, telling Bloomberg Television, “I’m sure there will be some modest revenue impact, but it will not be severe and certainly not long-term. I think it will sort itself out soon.”
Union Gaming analyst Grant Govertsen said the caps are a way for the Chinese government to reduce ATM transactions used by Mainland Chinese to convert yuan to Hong Kong dollars. The new limit, which cuts individual transactions in half, will in turn double transaction fees. “We steadfastly believe the government, both mainland and Macau, are not targeting the gaming industry,” Govertsen wrote. “Both governments want to support the ongoing mass market recovery rather than implement policy that might derail it.”
Meanwhile, Paulo Chan, director of the Gaming Inspection and Coordination Bureau, continues to be upbeat about the coming year. “Gaming revenue is expected to see stable development in 2017 and hopefully go upward,” Chan said. “Macau has started to see healthy and sustainable growth.”
According to Bloomberg News, the Macau government has forecast gambling revenue next year of 200 billion patacas (US$25 billion), the same amount projected for this year and 13 percent below the estimates of five analysts surveyed by Bloomberg. The city’s gaming industry crawled out of a 26-month streak of revenue declines in August, and has seen upticks every month since.
“The industry has learned the importance of healthy development,” Chan said. “We will continue to prescribe in the current direction. It doesn’t seem necessary for a heavier dose of medicine.”
