\nStephanie Wong and Billy Chan, Bloomberg \u00b7 February 6, 2015 at 4:15 am
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\n\t(Bloomberg) \u2014 China is starting a crackdown to stop foreign casinos from luring its citizens to gamble overseas, as the government extends its campaign against corruption that\u2019s already prompted high-stakes gamblers to avoid Macau.<\/p>\n
\tThe authorities will focus its assault on casino operators from neighboring countries that have set up offices \u201cto attract and recruit Chinese citizens\u201d to gamble abroad, Hua Jingfeng, a deputy director at China\u2019s Ministry of Public Security, said at a briefing held in Beijing today.<\/p>\n
\tGalaxy Entertainment Group Ltd. led gains among Macau casino shares after news of the crackdown, jumping 7.1 percent by the close of trading in Hong Kong for its biggest rise since April 2014. While shares reacted positively on the anticipation players would return to Macau from overseas casinos, the overall tone is still negative, Credit Suisse Group AG analysts said.<\/p>\n
\tWhile marketing of gambling activities has generally not been allowed in China, \u201cre-iteration of this anti-gambling by the official means we don\u2019t see little room near term for China to relax visa trends to Macau soon,\u201d Credit Suisse analysts led by Kenneth Fong wrote in a note.<\/p>\n
\t\u2018Big Market\u2019<\/p>\n
\tChinese President Xi Jinping\u2019s two-year battle against corruption and Macau\u2019s stricter travel rules have deterred high- stakes gamblers from entering Macau, the world\u2019s biggest gambling hub that relies on so-called VIPs for a majority of the city\u2019s revenue. Some Chinese gamblers have instead opted for casinos in countries including the Philippines, South Korea, Vietnam, Cambodia, Australia and Singapore.<\/p>\n
\t\u201cSome foreign countries think of us as a big market, and we have already investigated a series of related cases,\u201d said Hua, according to a People\u2019s Daily transcript of the briefing, where the ministry announced a wider clampdown on online gambling and prostitution.<\/p>\n
\tHua, deputy director of the ministry\u2019s bureau of public security management, didn\u2019t specify the countries.<\/p>\n
\tWynn Macau Ltd. closed 3.5 percent higher, Sands China Ltd. and Melco Crown Entertainment Ltd. both gained 3.1 percent, MGM China Holdings Ltd. climbed 2.6 percent, while SJM Holdings increased 1.4 percent. Hong Kong\u2019s benchmark Hang Seng index closed down 0.4 percent.<\/p>\n
\tCambodia Casino<\/p>\n
\tThe crackdown on foreign casinos\u2019 representative offices won\u2019t impact existing gamblers, who already know those casinos, or on new VIP players, who\u2019re brought to them by junket operators, according to Fong.<\/p>\n
\t\u201cHaving a much stronger control over the casino representative office in China means this will make their job more difficult to find new players,\u201d Fong said, adding that it will hit the recovery for new premium mass market players, referring to high-stakes bettors who don\u2019t rely on junkets for gambling loans.<\/p>\n
\tNagaCorp Ltd., which has a casino in Cambodia, is trying to woo more higher-spending Chinese gamblers to its property by working with more Macau\u2019s junket operators, the middlemen who bring in Chinese high rollers for casinos, Chairman Timothy McNally said in an interview yesterday.<\/p>\n
\tThe company is hiring more people in Macau and mainland China and working with travel agencies to draw more customers, McNally said. NagaCorp shares fell 0.34 percent.<\/p>\n
\tEcho Entertainment Group Ltd., operator of Sydney\u2019s only casino, is taking more bets by Chinese VIPs, Chief Executive Officer Matt Bekier said in an interview this week.<\/p>\n
\tRoom Closures<\/p>\n
\tMacau junket operator David Group, which was closing three of its seven VIP rooms in the city amid the industry downturn, has said it is taking more wealthy customers beyond Macau to Asian centers with more relaxed visa approval process, such as Manila, Vietnam and South Korea.<\/p>\n
\tMacau\u2019s government is stepping up regulations of the gambling industry, including tightening scrutiny on junket operators and the use of China UnionPay debit cards at casinos in Macau to obtain cash for gambling.<\/p>\n
\tA hotel executive who\u2019s a nephew of casino tycoon and SJM Holdings Ltd. founder Stanley Ho was arrested last month in the largest bust of a prostitution ring in the city\u2019s history, in a sign that Xi\u2019s crackdown was expanding to include long-tolerated vices.<\/p>\n
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