Sector Snap: Casinos down on Macau probe report
LOS ANGELES (AP) — Shares of casino operators traded lower Tuesday after a published report raised questions about possible money laundering related to so-called gambling junkets in Macau.
The Wall Street Journal reported that the Chinese government has ramped up its scrutiny into the Chinese gambling enclave's booming casino industry and junket operators, which mostly arrange for wealthy Chinese gamblers to come to Macau, lend them money and make big profits from collecting on debts.
Police in mainland China and Macau have detained people from at least three of Macau's largest junket operators, the newspaper reported, citing unnamed persons familiar with the situation.
In a research note published Tuesday, Sterne Agee analyst David Bain said that the crackdown on junket operators has yet to have an impact on gross gambling revenue. He noted that Chinese officials question junket operators from time to time.
"While there is risk associated with investigations of this manner, at this point, we do not see evidence of a fundamental shift from our Macau bull thesis," Bain wrote.
Still, the analyst said that he expects to see tighter controls in China and related areas on the movement of money, as law enforcement seeks to stem money laundering, especially as the yuan continues to rise in value.
"However, given the fragile and large underground banking system in China, a quick move toward major enforcement risks destabilization," Bain said. "Therefore, we see baby step progress as more likely occurring in the relative near or intermediate term."
Among casino operators, Melco Crown Entertainment Ltd. led the sector decline in Tuesday afternoon trading, with shares down $1.35, or 8.8 percent, to $14.02. Las Vegas Sands Corp. slid $1.48, or 3.2 percent, to $45.27, while MGM Resorts International fell 27 cents, or 2.7 percent, to $9.90. Wynn Resorts Ltd. lost $3.34, or 2.9 percent, to $110.06.