Macau’s largest junket operator, Suncity Group, sent a warning to its agents and customers last Friday regarding the risks of moving large amounts of money across the Macau-China border, according to brokerage Sanford C Bernstein.
The warning is seen as an example of the possible dangers ahead for Macau’s VIP business, which has enjoyed a strong recovery in recent months, including 34.8% year-on-year growth in VIP baccarat revenue in 2Q17.
It also follows the announcement last month that a new currency declaration protocol for all passengers arriving or departing from Macau will come into force from 1 November 2017. The “Control of Cross-Boundary Transport of Currency and Bearer Negotiable Instruments (CBNIs)” law, which was first proposed in late 2016, passed the Legislative Assembly on 12 June and will require travelers carrying cash or monetary instruments worth MOP$120,000 or more to submit a declaration form to customs. Such instruments include cheques, draft, payment orders, promissory notes and more.
“The warning in itself is not a harbinger of doom, but should be viewed as a highlight of the continued risk that China’s continued focus on capital outflows poses to Macau gaming GGR (in the VIP and high end Premium Mass segments),” Bernstein said in a Monday note.
“While the Chinese authorities run ongoing investigations into fund transfers, numerous bank accounts come under scrutiny and are occasionally frozen. The warning largely reiterated the risk. The exact purpose of the warning is not clear at this stage. It may be for purposes of reminding agents and players about the need to be vigilant.
“In the short run, the warning may lead to some customers keeping their funds (for example, any winnings) in junket accounts rather than potentially transfer back to China. However, there may also be heightened concern about using various cross border transfer channels, which may create some liquidity headwind for the junket industry.
“It is likely too early though to call an end to the junket VIP recovery [but] we have previously highlighted the concern we have about high end Macau gaming facing future headwinds in light of regulatory risks.”
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