Macau Casinos Fall on Report China to Regulate UnionPay Use

  • China to target illegal use of payment devices: newspaper
  • Chinese government has been trying to rein in capital outflows

Macau casino stocks fell in Hong Kong trading after the South China Morning Post reported China will introduce new measures to crack down on the use of illegal China UnionPay Co. point of service devices, which could spur more scrutiny on Macau transactions.

SJM Holdings Ltd. dropped 2.8 percent by the close of trading in Hong Kong to HK$5.49, the lowest level since Sept. 30. Sands China Ltd. fell 1.7 percent, with Wynn Macau Ltd., Galaxy Entertainment Group Ltd. and MGM China Holdings Ltd. ending at least 0.2 percent lower. The benchmark Hang Seng Index lost 1.1 percent.

UnionPay will require millions of mobile point of service transaction devices, or debit-card transaction terminals, to be properly registered across the nation, the South China Morning Post reported, citing an internal memo issued by the company’s headquarters on Thursday. The memo sets out a detailed nationwide audit and warns that sanctions will be imposed if a raft of new controls are not adhered to, according to the newspaper.

"These actions are all indications of continued Chinese government enforcement against illegal activity related to UnionPay card use," Bernstein’s analysts led by Vitaly Umansky wrote in a Thursday note. While most transactions related to UnionPay in Macau are done through legal channels, “there is risk that greater scrutiny may be cast upon the unique Macau pawnshop business model in which cash transactions are recorded as goods purchases,” they wrote.

Representatives from UnionPay and China’s central bank held a meeting on Dec. 8 to discuss on how to strengthen regulation on the use of the payment device and clamp down on "fake commercial trades," the company said in an e-mailed statement.

China has been trying to crack down on illicit money channeled through Macau’s casinos for more than a year. China’s Ministry of Public Security had discussed with Macau regulators on “criminal activities” related to mainland bank cards and point of service machines. The Macau Monetary Authority ordered jewelry stores and pawnshops operating on casino floors to remove their UnionPay card terminals, making it harder for bettors to buy expensive items that they exchange for cash to gamble with and skirt China’s currency controls.

Macau police arrested in August 17 people in a raid on five pawnshops thought to be using China UnionPay point-of-sale terminals to illegally take cash out of China.

— With assistance by Daniela Wei

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