Macau’s gaming industry is unlikely to be impacted by a new policy implemented in China targeting capital outflow, according to Macau-based analyst Grant Govertsen.
China’s State Administration of Foreign Exchange rolled out its latest policy, effective immediately, over the weekend which applies to all types of bankcards and limits the total overseas withdrawal capabilities of an individual to RMB100,000 (US$15,000) per year regardless of how many accounts they have. It represents a significant upgrade on previous restrictions which limited individuals to RMB per account per year, meaning the more accounts someone held the more money they could withdraw.
The new rules will also see those who exceed their annual overseas cash withdrawal have their ATM cash withdrawal abilities suspended for the rest of the year plus the following year.
However, Govertsen says the policy is unlikely to have any measurable impact on Macau’s gaming market if other recent restrictions such as the lowering of daily withdrawal limits and implementation of facial recognition technology on ATMs is any indication.
“We expect this latest restriction to be no different,” said Govertsen, adding that the new restrictions are not targeted at Macau but on all overseas transactions.
“First, the limit of US$15,000 per individual per year (rather than per account per year) would only potentially impact premium mass players given that lower-tier mass players average annual theoretical GGR contributions lower than $15k and that VIP players are playing on credit.
“Second, it is quite likely that many premium mass players have established overseas bank accounts already, which would not be impacted by domestic bankcard restrictions. Third, we believe that using bankcards to withdraw cash from ATMs has always been more of a last-choice option anyway given the lack of limits on bankcard purchases. Put together, we would not expect there to be any measurable impact on Macau GGR, although perhaps at the margin some very small number of premium mass players could migrate to VIP.”
Brokerage Sanford C Bernstein is slightly more cautious, suggesting the policy could have some impact on mass market as well as the lower end of premium. “According to feedback in our 2017 China Premium Consumer Usage & Attitudes Survey, over 40% of Macau gaming respondents withdraw cash from ATMs using China UnionPay cards,” Bernstein analysts said.
“Overall, the new policies may portend further capital controls to come in 2018. We would continue to caution that the possibility of further capital control restrictions/scrutiny may be forthcoming (although they may not be directed specifically at Macau).
While these new policies may create some headwind to GGR in 2018, the bigger concern would be continued clamp downs on capital movement out of China. The most significant headwinds on GGR would occur if there are limits placed on Macau’s pawnshop system or greater crackdowns on underground banking channels, for example.”
