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Macau casino stocks tumbled, erasing US$4.8 billion of market value in Hong Kong, as the arrest of the head of the biggest junket operator in the gambling hub revived concerns about Beijing's increased scrutiny of the industry.
Sands China and Galaxy Entertainment, the two gaming stocks on the benchmark Hang Seng Index, dropped more than 5 per cent on Monday, extending a sell-off on Friday that was spurred by the emerge of the Omicron virus strain. MGM China sank 10 per cent. The losses were much wider than the index's 1 per cent decline.
A gauge tracking six casino stocks plunged 7.6 per cent on Monday, the biggest slide since September 15 when the Macau government issued a draft on the overhaul of the gambling industry. Monday's losses amounted to almost one-third of the September rout in the casino concessionaires.
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"Macau's go-go years do seem over," said Steve Vickers, a risk management consultant at Steve Vickers & Associates and a former Hong Kong policeman. "Investors in the casino businesses should manage expectations accordingly."
Suncity Group chairman Chau Cheok Wa was arrested on Saturday in a cross-border gambling investigation. Photo: Visual China Group via Getty Images alt=Suncity Group chairman Chau Cheok Wa was arrested on Saturday in a cross-border gambling investigation. Photo: Visual China Group via Getty Images>
The casino industry's rapid expansion always depended on a degree of acquiescence in capital outflows and organised crime involvement with the junkets, Vickers added. China and Macau have now shown "an appetite for tighter control," he said.
Local authorities arrested Alvin Chau Cheok-wa and 10 others over the weekend. The alleged crime syndicate, comprising 199 shareholder-level representatives and more than 12,000 agents led by Chau, had developed a network of more than 80,000 mainland punters, according to the police in China's eastern city of Wenzhou.
Chau, 47, operates the largest gambling junket through a Macau unit he founded in 2007. Junket operators are go-betweens who bring high rollers to casinos, extending them credit and collecting interest on their debts.
Hong Kong-listed Suncity Group Holdings, a resort operator where Chau is the chairman and controlling shareholder, was halted from trading on Monday. It fell 7.3 per cent on Friday. Its unit Summit Ascent, which operates casinos in Russia, was also suspended.