Macau casino stocks suffer US$5.5 billion sell-off as China's gambling crackdown snares junket boss

arrested Alvin Chau Cheok-wa, filing, Greater Bay Area

Macau casino stocks tumbled, erasing US$5.5 billion of market value in Hong Kong, as the arrest of the head of the biggest junket operator in the gambling hub revived concerns about Beijing’s increased scrutiny of the industry.

Sands China and Galaxy Entertainment Group, the two gaming stocks on the benchmark Hang Seng Index, dropped at least 7 per cent on Monday, extending a sell-off on Friday. MGM China sank 12 per cent. The losses were much wider than the index’s 1 per cent decline.

An index tracking six casino stocks plunged 8.6 per cent on Monday, set for its biggest slide since September 15, when Macau issued a draft on the overhaul of the gambling industry. Today’s sell-off erased about US$5.5 billion, almost one-third of the September losses in the concessionaires.

Local authorities arrested Alvin Chau Cheok-wa and 10 others over the weekend. The alleged crime syndicate, comprising 199 shareholder-level representatives and more than 12,000 agents led by Chau, had developed a network of more than 80,000 mainland punters, according to authorities in China’s eastern city of Wenzhou.

arrested Alvin Chau Cheok-wa, filing, Greater Bay Area

Suncity Group Holdings chairman Chau Cheok Wa was arrested on Saturday in a cross-border gambling investigation. Photo: Visual China Group via Getty Images

Suncity Group, a resort operator controlled by the 47-year-old Chau, was suspended from trading in Hong Kong on Monday.

Sun Entertainment Group, a filmmaker and funeral services provider controlled by Chau and listed on the city’s board for smaller growth companies, tumbled by as much as 63 per cent. It recently traded 25 per cent lower.

“The board wishes to emphasis[e] that the news coverage is relating to the personal affairs of Mr Chau,” Sun Entertainment said in a filing late Sunday. “The board is of the view that the incident does not have any material impact on the financial position, business nor operation of the group.”

This is the second time this year that Macau’s casino stocks have been walloped by the regulatory crackdown. In September, some US$17 billion in market capitalisation was wiped out from the gaming stocks in a single day after the former Portuguese colony unveiled a draft to tighten the grip on the sector, including the appointment of government representatives.

The arrest of Chau is a fresh reminder to investors that Macau’s gambling industry, which contributes to about 80 per cent of the city’s tax revenue, still remains a focus for Beijing’s top leaders. Macau’s casinos, which used to be a place for corrupt mainland officials to splurge, have been blamed for money laundering and capital flight.

Beijing has been trying to reduce Macau’s reliance on the gambling industry. Under the Greater Bay Area scheme, Macau aims to be built into a world-class leisure centre and a commerce and trade cooperation service platform.

arrested Alvin Chau Cheok-wa, filing, Greater Bay Area

Suncity Group is the largest junket operator in Macau. Photo: Reuters

Chau is also the founder and CEO of Suncity Group, a Macau-based conglomerate founded in 2007 and the parent of Suncity Group Holdings and Sun Entertainment Group.

The group is the largest junket operator in Macau, with a market share of 40 per cent, according to an industry insider.

Junket operators are go-betweens who bring high rollers to casinos, extending them credit and collecting interest on their debts.

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