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Macau recovery yet to take shape as liquidity, China regulatory controls impact VIP sector

Macau’s leading junket operators have seen no increase in volume since border restrictions between Macau and Guangdong Province began easing, according to industry analysts, with tightening controls on outbound capital flow from China and liquidity concerns heavily impacting the VIP sector.

Authorities reinstated the Individual Visit Scheme (IVS) for residents of Zhuhai to visit Macau on 12 August, with the rest of Guangdong set to follow this Wednesday, however as of Sunday there had been little impact with daily visitation rising only slightly to 7,700 people on Sunday compared with an average 5,600 per day in early August.

Brokerage Bernstein said in a Monday note that August GGR to date is still tracking at a 95% year-on-year decline and is even down 5% on July revenue numbers, despite the VIP segment enjoying a higher than normal win rate.

Credit Suisse research analysts Kenneth Fong, Lok Kan Chan and Rebecca Law pointed to two bottlenecks hindering Macau’s recovery, led by China’s tightening of regulatory controls on outbound capital flow and overseas gambling.

“Our recent checks with junket agents show the situation is ongoing,” they said. “We [have learned] that a lot of junket agents were detained in China. The agents are afraid even to collect gambling debt, not to mention bringing players to Macau.”

The analysts also pointed to tight liquidity in Macau, with capital withdrawals by customers from junkets increasing as the border reopens.

“Pawn shops we spoke to said they need much longer time to wire money (3 days for an amount that historically just need 15 minutes),” they said.

“As Macau runs low on HKD notes, junket agents are even willing to take a 5% to 10% discount to cash out their cash chips – hurting premium mass players’ accessibility to capital.”

August GGR is tipped to fall by 94% year-on-year before potentially showing some improvement on Guangdong-wide IVS in September.

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