New currency rules may negatively impact Macau casinos

The local branch of global brokerage firm Sanford C Bernstein and Company has reportedly detailed that it is still too early to tell what impact recently-tightened foreign currency transaction rules will have on the casino industry in Macau.

Beijing is tightening its belt:

According to a Friday report from GGRAsia, the updated regulations were first revealed on the final day of January via a revised judicial interpretation from officials in Beijing and have the potential to seriously hurt junket operators as these often rely on underground banks in order to transfer funds between Macau and mainland China.

Reiteration exercise:

But, analysts Kelsey Zhu, Vitaly Umansky and Eunice Lee from the Hong Kong-based division of Sanford C Bernstein and Company reportedly declared that the fresh rules, which were issued by the Prosecutor General’s Office and the Supreme People’s Court, have simply highlighted activities that were already illegal such as maintaining pools of capital that match buyers and sellers of the local renminbi currency.

All about enforcement:

The Sanford C Bernstein and Company analysts reportedly stated that the biggest consequence of the revised regulations seems to have been to give ‘law enforcement more tools to work with in targeting activity that was already largely operating outside the bounds of what is allowed’. As such, it purportedly proclaimed that the levels of implementation will ultimately determine the impact of the new rules on local junket operators and their casino clients in Macau.

Reportedly read a statement from the Sanford C Bernstein and Company analysts…

“In the end, enforcement will be the key to what happens. It is too early to say at this stage what the impact on Macau may be. If the rules are all strictly enforced and the scope of government action against all forms of money movement is deep and broad, the impact would be severe.”

Junket operators wait:

If authorities were to implement a more stringent enforcement policy, the Sanford C Bernstein and Company analysts reportedly explained that ‘smaller junkets and agents’ would likely be the most seriously affected. Furthermore, they purportedly detailed that a ‘severe clampdown’ on moving currency out of mainland China could lead to ‘more under-the-table betting’ that would negatively impact VIP gross gaming revenues at the over 30 casinos in Macau.

Reportedly read a statement from the Sanford C Bernstein and Company analysts…

“The view from the large junkets is they are broad enough with numerous channels where creative mechanisms are always in play. Another impact could be further consolidation among the junket entities to create larger more diversified capital bases.”