International edition
October 20, 2021

Two-thirds of its gambling revenues come from high-spending mainland Chinese

Macau casino stocks plunge on credit crunch fears

(Macau).- Macau casino stocks plunged Monday on fears tighter credit in China will curtail the flow of wealthy high-rolling gamblers that have powered the city's gambling boom.

T

he biggest casino operator, SJM Holdings, lost a quarter of its value on the Hong Kong stock exchange. MGM China Holdings, a unit of MGM Resorts International, tumbled 20 percent and other Hong Kong-listed units of U.S. casino operators also plunged. The declines outpaced the 4.4 percent decline in the benchmark Hang Seng Index.

About two-thirds of Macau's gambling revenues, which soared nearly 60 percent to us$ 23.5 billion last year, are estimated to come from high-spending mainland Chinese who gamble with borrowed money from so-called "junket operators."

The junket operators are essentially tour agencies that help mainland Chinese travel to Macau, but also lend them money to gamble in private VIP rooms and collect debts when they return home.

Some junket operators are financed through China's underground lending system, which has sprung up to lend to private enterprises that have a hard time getting loans from China's mostly state-owned banks.

Recent news reports that these unofficial lenders are tightening credit are spooking investors, analysts said. "It's hard to tell really what's going on but as we hear these stories, these rumors, people are seizing on them and using it as an excuse to sell things down," said Philip Tulk, head of gaming research at Royal Bank of Scotland.

Last week, reports emerged that the Chinese city of Wenzhou was struggling with a credit crunch that cut off the only source of funding for private companies and prompted dozens of debt-laden company bosses to flee. Tulk said Macau gaming stocks had risen 20 percent for the year before Monday so investors are also selling to lock in gains.

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