The Macau government is reported to have been given the city’s casinos until July 1 to remove illegal UnionPay card-swipe devices from their properties.
The crackdown is said to have the support of Beijing, which controls state-owned UnionPay, and has rattled Macau’s high-flying casino stocks, following closely as it has on reports that the central government also plans to rein in abuses of the country’s visa system by citizens desiring to visit Macau more times than allowed under existing rules limiting outbound travel.
The deadline was reported in the South China Morning Post, which reported last week that UnionPay was moving to curb the freewheeling use of China’s only payment card to circumvent the country’s tight currency controls. The paper said Macau has been flooded with unregistered hand-held swipe devices from the mainland, allowing gamblers to withdraw cash in transactions that appear on the surface to have been conducted in China. The devices are also used to evade tax on the mainland, which is why they require authorization for use there.
Macau police have carried out a handful of raids in and around casinos in recent months and seized devices and cash. But the problem has reached dimensions that the central government could no longer ignore, a gaming analyst told the Post.
The Macau General Chamber of Pawnbrokers also has called on the local government to move more aggressively against the illicit trade, complaining that it has caused their business to slump by 40 percent.
Mainland visitors can legally take 20,000 yuan into Macau per visit (US$3,200) and withdraw as much as 10,000 yuan a day at cash machines with each card they possess. But the illegal trade dwarfs that, according to analysts, who believe it could have involved as much as 40 billion yuan ($6.28 billion) last year alone.
The Monetary Authority of Macau did not confirm the July deadline but said that UnionPay has been restricting the use of its cards in the gaming industry “since its inception.”
The agency said, “During the course of ongoing supervision of card acquiring services by banks, the Monetary Authority may, in accordance with any changes in and development of the market, streamline or strengthen relevant risk management and ongoing customers’ due diligence, with the objective of promoting healthy development of the sector.”
While investment analysts are uncertain of what the UnionPay and visa measures actually will entail and how they might affect gaming revenues, most of those talking to the media contend the fears are overblown.
Macau casinos fell just short of reaching a third straight $4 billion revenue month in April but still reported a 10.6 percent increase. March’s total was $4.4 billion, the third highest ever. For the first four months of 2014, gaming revenue is up 17.5 percent over the same period of 2013. This includes February’s single-month record of $4.8 billion.
Wells Fargo’s Cameron McKnight predicts May revenue could exceed the $3.7 billion collected a year ago by as much as 16 percent, which means another $4 billion month.
“We remain positive on the longer-term Macau,” he said.
“We believe there continues to be a significant disconnect between trends on the ground and share price behavior,” said brokerage Union Gaming Research Macau. “This, however, is not overly surprising given the current backdrop.”