China crackdown on junkets shows Macau’s pain is no one’s gain, Bernstein says

A crackdown on junket operators luring Chinese gamblers to Korean casinos over the weekend shows China’s government isn’t singling out Macau and will be prepared to target other jurisdictions seeking to lure the country’s gamblers, according to Bernstein Research.

ChinaNews reported over the weekend that police in Jiangsu, Shanghai, Hebei and Beijing clamped down on agents promoting Korean casinos. It said China’s Ministry of Public Security has started operation “Chain Break” against foreign casinos, which refers to breaking foreign casinos’ money chain flows and the individuals who scout gamblers from China.

The operation may also target tour agencies that help gamblers apply for foreign visas.

“We reiterate our view that over the long run, Macau’s loss is no one’s gain when it comes to regional competition (including the Philippines and Korea),” the note said.

“While regional markets may have some regulatory arbitrage opportunities against Macau (e.g. lower tax rate, more lenient gaming regulation and AML requirement), over the medium-term, we believe that Macau and China authorities may exert pressure on junket operations that aim to lure gamblers into the regional markets.”

It said Beijing appears to be making a statement out gaming activity being “offshored to foreign jurisdictions, while Macau is not being targeted in the same way.”

 The research house says it estimates gross gambling revenue for Macau in August will be down 34 to 36 percent.