Shares of Macau casino operators on Wednesday shed as much as a third of their value, losing about $18 billion, as the government kicked off a regulatory overhaul that could see its officials supervising companies in the world’s largest gambling hub.
With Macau’s lucrative casino licences up for rebidding next year, the plan spooked a Hong Kong market already deep in the red after Beijing’s regulatory crackdown on sectors from technology to education and property that sliced hundreds of billions of dollars off asset values.
Wynn Macau (1128.HK) led the plunge, falling as much as 34% to a record low, followed by a 28% tumble for Sands China (1928.HK). Peers MGM China (2282.HK), Galaxy Entertainment (0027.HK), SJM (0880.HK) and Melco Entertainment (0200.HK) all fell heavily, taking the drop to HK$143 billion ($18 billion).
U.S. casino companies also fell for the second straight day, losing as much as $4 billion in market capitalization on Wednesday, with Las Vegas Sands Corp (LVS.N) slumping to more than a year low, Wynn Resorts Ltd (WYNN.O) and MGM Resorts International (MGM.N), dropping 8% and 5%, respectively.
The slump came after Lei Wai Nong, Macau’s secretary for economy and finance, gave notice on Tuesday of a 45-day consultation period on the gambling industry to begin from the following day, pointing to deficiencies in industry supervision.
Beijing, increasingly wary of Macau’s acute reliance on gambling, has not yet said how the licence rebidding process will be judged.
“Margins will be crushed at the gambling capital of the world and that will drag down all the big casinos,” said Edward Moya, senior market analyst at OANDA in New York.
Some Hong Kong stock analysts wasted little time in downgrading their view of near-term prospects for casino operators in the Chinese special administrative region, who must all rebid for licences when current permits expire in June 2022.
J.P. Morgan is downgrading to neutral or underweight all Macau gaming names from overweight, because of the tougher scrutiny on capital management and daily operations ahead of licence renewals, said analyst D.S. Kim.
“We admit it’s only a ‘directional’ signal, while the level of actual regulation or execution still remains a moot point,” he said, adding the news would have already put doubt in investors’ minds.
Brokerage CFRA downgraded Wynn Resorts to “Strong Sell” from “Buy”, citing heightened regulatory risks and said the review was a major overhang for the company as well as other operators.