China mulls legalization of casinos in Hainan

The Chinese island of Hainan may become a new hub for land-based casinos, with government agencies reportedly considering allowing online betting and other gambling on the island, Bloomberg reports.

The move would likely have a significant impact on Asia’s gaming markets, especially Macau, which draws a large amount of mainland Chinese tourists yearly.

Macau’s casino stocks tumbled over the news, with Sands China and MGM Holdings dropping 6 percent and Wynn Macau falling 6.7 percent.

However, analysts were quick to play down the potential risks to Macau.

On Friday, Bernstein suggested caution against “reading too much into the headlines.”

“Based on the news report, the preliminary proposals are in very early stages and have not been fully rationalized. The proposal seems to be focused on potential legalization of "online gaming, lottery or sports betting" in Hainan. There is no indication that these preliminary proposals are pushing for the legalization of casino gambling. The proposals are part of a broad series of plans looking at ways to increase foreign tourism.”

“Legalization of casinos in Hainan would not be a key driver for foreign tourism, in our view,” wrote the brokerage.

Bernstein said that the possibility of casino legalization in Hainan have been brought up a few times in the past, including 2010, 2013 and January 2016.

“While any casino legalization on Hainan would create problems for Macau, we do not see casino development in China as a real threat to Macau now or in the foreseeable future,” said Bernstein.

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