China bet-aid ban a Macau junket worry, JP Morgan says


China bet-aid ban a Macau junket worry, JP Morgan says

A “clear-cut ban” from March 1 under a mainland China criminal law amendment on anyone seeking to “organise” mainland Chinese for the purpose of gambling outside the country, could “escalate fear among junkets and agents” used to working in Macau and facilitating mainland clients to play in Macau casinos, says a Tuesday memo from JP Morgan Securities (Asia Pacific) Ltd.

Promotion within mainland China of gambling in casinos beyond its boundaries had already been “well-understood to be illegal,” even before the law change, said the note from analysts DS Kim and Derek Choi.

But they added that the codification under China’s criminal law could make junkets and agents anxious “because they could be personally liable for the mere organisation of a gambling trip, under the amended law”.

A Macau junket investor had told GGRAsia in October he believed China’s move to criminalise any efforts to organise mainland residents for purposes of gambling abroad, would be a negative for the city’s junket sector, making its trading conditions more difficult.

The JP Morgan analysts echoed in their Tuesday update the view of two experts approached by GGRAsia that the definition of “outside the country” included the special administrative regions of Macau and of Hong Kong, as well as Taiwan.

“This should put an end to the discussion on whether the Macau SAR is covered by this law, because ‘outside the borders’ is typically interpreted as being outside mainland China in the legal context,” stated Mr Kim and Mr Choi.

In a separate note the same day, JP Morgan said investors should not view too enthusiastically the news that the daily average of Macau visitors during the December 23 to 27 Christmas season was greater than the daily average in either November or October.

Macau visitor volumes had “shown little” in the way of positive correlation with the city’s casino gross gaming revenue in the past, stated the institution.

“December could mark the first month since April that fails to deliver month-on-month improvement” in visitor volume to Macau, said Mr Kim and Mr Choi.

“Suffice it to say that the pace of recovery” in the Macau tourism market “is unexciting and falls short of our expectations and consensus at the time of border/visa resumption,” they added.

The latter was a reference to the general resumption across the mainland on September 23 of China’s exit visa system for independent travellers, known as the Individual Visit Scheme (IVS).

JP Morgan also gave commentary on Tuesday news that Macau and mainland law enforcement claimed to have broken up a suspected US$1.8-billion point-of-sale machine scam in Macau, alleged to have helped gamblers get cash in defiance of China’s cross-border currency restrictions.

“The impact of this bust should be rather small, given the ‘balloon effect,’ as players can still go to pawnshops and jewellery stores that use legal point-of-sale machines (though at higher fees than for allegedly illegal machines),” wrote Mr Kim and Mr Choi.

Though they added: “The news should be incrementally negative for the premium mass segment (a major user of the UnionPay scheme), which has been faring better than the VIP or grind-mass segments” since mainland visas to Macau restarted.

The analysts were referring to China UnionPay Co Ltd, a bank card service brand widely used in mainland China, Macau, Hong Kong, and latterly also overseas.


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