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Macau Casinos Drop on Report of Junket Arrests: Hong Kong Mover

Macau Casinos Drop on Report of Junket Arrests
Junket operators offer credit to high-stake gamblers, helping drive the VIP business that ccounts for about two-thirds of Macau’s casino revenues. Photographer: Jerome Favre/Bloomberg

Dec. 4 (Bloomberg) -- SJM Holdings Ltd. fell the most in six months, leading a decline in Macau casinos on speculation China’s government may increase scrutiny of junket operators, who provide credit to high-stake gamblers.

SJM, founded by tycoon Stanley Ho, dropped 5.8 percent to HK$17.24, the biggest drop since May 14. Galaxy Entertainment Group Ltd. fell 4.5 percent and Sands China Ltd. declined 4.4 percent.

Police in mainland China and Macau have detained people from at least three of the biggest junket operators in recent weeks, the Wall Street Journal reported, citing people familiar with the situation. By acting as middlemen, junket operators help drive the VIP business that accounts for about two-thirds of casino revenues in the world’s largest gambling hub.

“There is speculation about China’s new leaders stepping up scrutiny over junkets, talks about anti-corruption measures and a clampdown on China’s underground banking system,” said Lantis Li, a Hong Kong-based analyst at Capital Securities Corp. “All this speculation fueled unfavorable sentiment towards casino stocks.”

Broken Tooth

Xi Jinping, the new head of China’s ruling Communist Party, in November told his fellow leaders that unless they address corruption, social unrest may rise and it could lead to the demise of the party.

Any added scrutiny of the gaming business would also follow the release of the gangster known as Broken Tooth, or Wan Kuok-koi. Before his 14-year prison term, Wan had links to the local junket industry. Prior Wan’s Dec. 1 release, one of his former lieutenants was arrested, the Macau Daily Times reported.

Macau’s judiciary police doesn’t have information on the arrests reported by the Journal, according to Chiang Chi-meng, a public relations officer at the judiciary police.

MGM China Holdings Ltd. declined 3.1 percent. Wynn Macau Ltd. dropped 5.5 percent and Melco Crown Entertainment Ltd. fell 1 percent.

To contact the reporter on this story: Vinicy Chan in Hong Kong at vchan91@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

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