Draft gaming law forecasts tough days ahead for Macau junkets

by Charlotte Lee Last Updated
Draft gaming law forecasts tough days ahead for Macau junkets

A draft gaming law developed in Macau has suggested that the region’s junket industry will shrink.

Inside Asian Gaming reports that Macau’s junket industry will contract even further under proposed changes to gambling law, in the face of challenges due to the COVID-19 pandemic and a crackdown on cross-border gambling activities by mainland Chinese authorities.

The draft law enters 45 days of public consultation, with proposed changes focusing on areas of social responsibility, non-gaming development, strengthening government supervision and strengthening penalties for violation.

The latter of those looms large for junkets, with the government looking to clamp down on the practice of VIP rooms accepting player deposits and to hold concessionaires more accountable for the actions of junkets operating under their roof.

“During the daily operation, it is common that players will deposit certain money they win as a deposit with the casino and junkets,” Credit Suisse analysts wrote.

“The regulation against such practice may not only shrink the working capital pool of the players, but also increase the transactional costs of the high end players as they would have to transfer money to Macau for gambling every time.”

Smaller junket operations predicted for Macau

The result, according to brokerage Bernstein, would be a “much smaller junket operation in Macau than in the past”, although they note that such restrictions have been coming for some time.

“Junkets have lacked proper oversight and regulation and a key area will be reigning in junket activities,” the analysts said.

“Junket deposits have been a problem in the past and the government has been vocal about the need to reform this system.”

JP Morgan said that a proposal to hold operators accountable for their junkets, alongside recent amendments to China’s Criminal Law in relation to gambling, “could make it complicated for concessionaires to continue in the junket business as the potential downside/penalty could outweigh expected economic benefits.”

Junkets aside, industry commentators remained largely neutral on Macau’s gaming draft law given the absence of important detail around many of the proposed changes.

However, Credit Suisse did raise some concerns around diminished attractiveness of the sector for investors with the government looking to pre-approve dividend payouts and place a representative into each of the concessionaires, presumably to ensure the public interest is given equal weight to profit motives.

Notably, the announcement by the Macau government did not shine any light on when the re-tendering process will take place or on the future of the city’s many satellite casinos operating under the licences of concessionaires.

But absence of detail aside, Bernstein analysts said: “We do not view today’s events as negative for the Macau gaming industry. The process is largely progressing as we had anticipated.”

Macau’s August casino revenue dives

The latest Macau gaming figures have revealed a steep month-on-month drop in revenue.

GGR Asia reports that Macau’s casino gross gaming revenue fell by 47.4 per cent in August to US$554.5 million.

Judged year-on-year, August gross gaming revenue was up 234 per cent on August 2020, according to data issued by the city’s casino regulator, the Gaming Inspection and Coordination Bureau.

Investment analysts had suggested that August GGR was negatively impacted by tighter counter measures to prevent the spread of COVID-19 in Macau, coinciding with detection among four locals of the more infectious Delta-variant COVID-19.

The measures also involved, during the first three weeks of August, a tightening of COVID-19 test rules for inbound travellers by land, from neighbouring Guangdong province, the largest-single feeder market currently for Macau’s tourists.

The tighter rules coincided in the same period with a decline in daily visitor arrivals from the mainland.

Only mainland China has currently a travel bubble with Macau that is largely quarantine-free.

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