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Casino shares plunge on Chinese ATM restrictions

Sat, Dec 10, 9:15am by Staff Writer

Shares in some of the world’s biggest casino companies plunged after the Chinese government announced it was imposing a new withdrawal limit on ATMs in Macau.

The surprise decision to half the withdrawal limit on Union Pay ATMs, which are estimated to be used by at least half of the Chinese visitors to Macau, has rocked the gambling enclave.

With immediate effect, the maximum any account holder can withdrawal from a Union Pay ATM has been cut to 5,000 patacas ($626).

The move is designed to prevent the flow of cash out of the Chinese economy as the government attempts to stem the depreciation of the Chinese currency, the yuan.

But with Macau finally showing signs of recovery after a two and half year slump, the move could prove a stumbling block for the big casino players and there was an immediate reaction on the share market.

Melco Crown, run by casino heir Lawrence Ho, opened its $4 billion Studio City casino in October last year, followed by Steve Wynn’s $US4.2 billion Wynn Palace in August and the $US2.9 billion Parisian Macau in September. MGM is planning to open the $US3.1 billion MGM Cotai next year.

Shares in Melco Crown on the Nasdaq plunged from $19.20 to $16.87 on the news breaking, before making a slight recovery, while MGM, which is on the New York Stock Exchange, slumped from $30.59 to $28.31.

The high flying share price of Wynn Resorts on the Nasdaq, dropped from $101.24 to 90.72 in the space of two hours on Thursday afternoon while Las Vegas Sands dropped nearly $8 from $62.66 on the NYSE at the same time.

On the local front, Crown Resorts, which is invested in the Macau market through Melco Crown, dropped from $12.04 to $11.33 when the markets opened Friday. The Crown Resorts share price had just begun a recovery from its drop in October after 18 of its staff were detained in China,

However, despite the immediate pain, the big casinos are viewing the move as a long-term positive for the industry.

“The controls they have put into place are consistent with the controls they have put into place in the past,” MGM Resorts International Chief Executive Officer Jim Murren said in an interview on CNBC. “I don’t want to minimize the significance — it will reduce some revenue — but the long-term play is an extremely positive story.”

Analysts believe the move further strengthens the Chinese government’s push to clean up illegal money in Macau.

“We cautiously view the news as arguably ‘sending a message’ to safeguard against potential capital outflow abuses, amidst the continued decline in China’s foreign exchange reserves,” DS Kim, an analyst at JPMorgan Chase & Co. in Hong Kong, wrote in a note. “We note that this would be the first capital control measure that directly targets Macau, hence may be viewed as a meaningful signal.”

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