David Fickling is a Bloomberg Gadfly columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.

By rights, Macau's casino industry shouldn't exist at all. The world's biggest gambling hub survives in flagrant violation of China's restrictions on its capital account.

Mainlanders are allowed to take no more than $50,000 across the border each year. At Galaxy Entertainment Group Ltd.'s Sky 32 VIP room, baccarat players starting with that amount, and on a typical loss rate of 3 percent, would need to stake all their funds 100 times over to reach the floor's 10 million yuan ($1.45 million) minimum bet limit -- extraordinarily heavy play, even by Macau's standards.

Poor Hand
Shares in Macau's biggest casino companies slumped Friday morning
Source: Bloomberg
Note: Intraday times are displayed in ET.

That helps explain the extreme reaction from the territory's casino stocks to a report that Beijing will crack down on credit card withdrawals.

Shares of Sands China Ltd., Wynn Macau Ltd. and Galaxy fell the most in five years Friday after the South China Morning Post reported that the daily limit on UnionPay card withdrawals will be cut from 10,000 patacas ($1,250) to 5,000 patacas. MGM China Holdings Ltd. also slid more than 10 percent and SJM Holdings Ltd. was off as much as 7.7 percent, while Melco Crown Entertainment Ltd. dropped 14 percent in the U.S. Although the shares later recovered after UnionPay said it hadn't changed its limits, they remained below the levels where they started.

What effect would such rules have? China has been trying for several years to shift Macau from a reliance on high-stakes VIP gamblers toward a more mass-market image, worrying (with reason) that gaming tables were being used to evade capital controls. But the currency restrictions already in place, combined with the vast sums involved, mean the VIP business operates largely on credit -- so if anything, the mass business Beijing wants to promote would be hit hardest by a restriction on cash withdrawals.

UnionPay City Blue
Mass-market spending by mainland Chinese tourists in Macau is typically above 5,000 patacas per head
Source: Direccao de Inspeccao e Coordenacao de Jogos, Macau Statistics and Census Service, Gadfly calculations
Note: Gambling losses figures based on quarterly mass-market gaming revenue figures divided by 95% of quarterly mainland Chinese visitor numbers, on assumption that only 5% of visitors are VIPs. Mass-market losses per capita would be higher if the share of VIP gamblers is larger.

Comparing visitor numbers to gambling losses gives you a good idea of how serious this could be. Assuming only one in 20 visitors is a VIP,  the average mass-market gambler loses about 5,000 patacas per visit to Macau, on top of which they spend 2,000 patacas or so on food, lodging and shopping. Most gamblers tend to stay only a few days and don't like to be completely cleaned out when they visit the tables, so on those numbers it's easy to see how a 5,000 patacas-a-day limit could put a serious dent in mass-market revenue.

That sense of policy inconsistency -- a government trying to encourage the mass market, but inadvertently hurting that same market because of separate fears about losing control of its capital account -- is likely to be the main concern for gambling investors.

They're not taking fright because of specific concern about how any new rules would affect companies' earnings, but rather because of the brutal reminder that the entire industry remains the plaything of Beijing's policy priorities. Despite its Wild West image, the casino business almost everywhere is highly regulated -- and nothing scares investors in regulated industries so much as political uncertainty.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

(Corrects second paragraph to remove an erroneous number for visitor arrivals.)

  1. If you assume a higher share of VIP players, which isn't unreasonable, per-capita mass-market gambling losses go up.

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David Fickling in Sydney at

To contact the editor responsible for this story:
Paul Sillitoe at