Macau Casinos Pare Losses as Analysts Reject ATM Cap Report (1)

(Bloomberg) -- Casino stocks pared losses in Hong Kong as analysts from Sanford C. Bernstein & Co. and Union Gaming Group LLC raised doubts about the accuracy of a report saying there will be a 50 percent cut on UnionPay ATM withdrawal limits in Macau, the world’s largest casinos hub.

Wynn Macau Ltd., Sands China Ltd., and Galaxy Entertainment Group Ltd. narrowed their declines after plunging more than 10 percent in early Hong Kong trading Friday, while the city’s benchmark Hang Seng Index was little changed. The South China Morning Post had reported the Macau Monetary Authority will impose the cap on China UnionPay Co. cards from Saturday, reducing the daily withdrawal ceiling to 5,000 patacas ($626).

China has been tightening its capital controls as depreciation pressure builds on the yuan. The measures have included a pause on some foreign acquisitions and bigger administrative hurdles to taking yuan overseas, people familiar with the steps have told Bloomberg News. At the same time, Macau’s $30 billion gaming industry has rebounded as operators including Wynn Macau Ltd. opened new resorts. Gross gaming revenue rose for the fourth straight month in November, recording the strongest year-on-year growth since February 2014.

Read: Macau stocks are at the mercy of Beijing policy shifts

“We have learned that the South China Morning Post article’s assertion of daily transaction limits to UnionPay cash withdrawals in Macau is not correct,” Vitaly Umansky, an analyst at Sanford C. Bernstein & Co., wrote in a note. “Our understanding is that the Macau Monetary Authority has ordered local banks to implement a transaction limit cash withdrawals of 5,000 patacas, while maintaining the daily withdrawal limit at 10,000 patacas,” he wrote.

Sands China and Galaxy shares were trading 6.9 percent lower as of 2:05 p.m. in Hong Kong, after both falling as much as about 11 percent. Wynn Macau pared losses to 6.4 percent, from a drop of as much as 13 percent.

‘Hasn’t Changed’

This new change won’t have a material impact on Macau’s gross gaming revenue, although the withdrawal limits may change in the future, Umansky wrote. Nearly half of Chinese customers in Macau use UnionPay ATM withdrawals as a source of cash for gaming, with other methods including bringing cash directly, withdrawing cash from Hong Kong and Macau bank accounts, and through local pawnshops, according to the Bernstein analyst.

UnionPay International, a China UnionPay subsidiary focused on the global business, hasn’t changed its overseas cash withdrawal limit policy for cards issued in mainland China, the company said in a statement sent by text on Friday. The limits remain at 10,000 yuan per day, and 100,000 yuan per year, it said, without commenting specifically on the South China Morning Post report, which refers to daily UnionPay limits in Macau’s patacas.

A spokesman for the Monetary Authority of Macao did not immediately respond to a request for comment on the South China Morning Post report.

Yuan Weakness

“We steadfastly believe the government (both mainland and Macau) are not targeting the gaming industry,” Union Gaming analyst Grant Govertsen wrote in a note. “Both governments want to support the ongoing mass market recovery rather than implement policy that might derail it.”

There’s no change related to the total daily withdrawal limit in Macau at the moment, and the new per transaction policy stems from recent increase in overseas ATM transactions as a means for “not-so-wealthy” mainland Chinese to convert yuan to Hong Kong dollars due to ongoing yuan weakness, Govertsen wrote. Macau’s patacas are pegged to the Hong Kong currency.

Crown Resorts Ltd. had dropped as much as 8 percent in Sydney on Friday, before paring the slump. Casino operators’ shares also slid in New York on Thursday. Wynn Resorts Ltd. fell as much as 12 percent, Las Vegas Sands Corp. dropped 13 percent and MGM Resorts International sank 4.3 percent. Melco Crown Entertainment Ltd. plunged 14 percent.

Las Vegas Sands declined to comment, while other casino operators didn’t immediately respond to requests for comment. The South China Morning Post didn’t immediately respond to requests for comment on the story.

Series of Restrictions

Macau has continued to tighten scrutiny of its casino industry amid the nascent gambling revenue recovery. Imposition of stricter regulations concerning junket operators, money laundering and phone betting this year are likely to benefit the Chinese territory’s business, said Paulo Chan, director of the Gaming Inspection and Coordination Bureau, said in an interview this month.

The Macau government began restricting UnionPay debit cards in 2014, ordering jewelry shops and pawnshops on casino floors to remove the company’s card terminals. Four people were arrested in the gambling enclave last year on suspicion of illegally using altered UnionPay terminals to obtain cash for clients. In Hong Kong, UnionPay account holders were blocked in October from using their cards to buy insurance, which gave them another potential way to move money overseas by swiping the cards multiple times.

Macau is in the midst of a surge in new casino construction, with new billion-dollar resorts popping up that target casual gamblers instead of the high rollers that form the bulk of its gambling customers.

Almost a million Chinese tourists visited the former Portuguese enclave in the first seven days of October for Golden Week, the most in at least a decade.

Wynn opened its most expensive casino in Macau, the $4.2 billion Wynn Palace, in August. Sheldon Adelson’s Las Vegas Sands opened the $2.9 billion Parisian Macau in September, and MGM is planning to open the $3.1 billion MGM Cotai next year.

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--With assistance from Christopher Palmeri Paul Barbagallo Judy Chen Jake Ulick and Crayton Harrison To contact the reporters on this story: Daniela Wei in Hong Kong at jwei74@bloomberg.net, Lisa Pham in Hong Kong at lpham14@bloomberg.net. To contact the editors responsible for this story: K. Oanh Ha at oha3@bloomberg.net, Divya Balji at dbalji1@bloomberg.net, Daryl Loo, Dave McCombs

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