Reputedly the house always wins. Try telling that to investors in Macau’s casinos, whose share prices have been ravaged by almost two years of slump.
Hence the hopes last month that the worst of Macau’s woes might be over, when it revealed $2.4 billion in gross gaming revenues for February. That was a fall of just 0.1% on the same month last year and the closest that the casinos have come to reporting growth since May 2014.
Charlene Liu, HSBC’s gaming analyst, attributed much of the improvement to a pick-up in visitor numbers over Chinese New Year. Similar performance is unlikely in March, she says, although there are signs of a “gradual and steady recovery” in the sector. Certainly, improving sentiment has helped Macau’s casino shares rebound strongly since the beginning of the year.
Another of Liu’s observations was that revenue growth from mass-market gamblers had turned positive in February, after 17 months of declines, while volumes fell again for the junket operators that host the bigger-spending VIP players.
Macau is part of the way through a painful transition away from its reliance on high-roller players. As WiC has reported before, Xi Jinping’s anti-graft edict has bitten a huge hole in VIP baccarat, the single biggest contributor to the city’s gaming. At the same time the casinos have been opening a broader range of attractions. The goal is to make Macau more like Las Vegas, which relies less on pure-play gaming by pulling in millions of visitors for its shows and conventions.
The strategy sounds even more advisable following the release last month of a study by T Wing Lo and Sharon Ingrid Kwok, two academics from the City University of Hong Kong, linking the junket industry with triad activity.
The authors talked to insiders about how relationships with triads help the junket operators to issue credit and collect debts from VIP players. “Even though triad membership is not necessarily a prerequisite to entering the [junket] business, the respondents admitted that triad dor [reputation] and power is a crucial factor in winning the trust of casino management,” they suggest.
They also interviewed insiders about some of the scams at the high-stakes tables, with a former police officer identifying VIP baccarat as a favourite for money laundering syndicates.
“The first team place one million Hong Kong dollars on the banker bet, and the second team places another million on the player bet in the same game,” the former officer explains. “Overall it’s a draw – but to the syndicate the money is now clean.”
A second scam is “the multiplier” bet in which smaller bets at the tables are backed by much larger, private wagers between players and the junkets.
“Some whales [high-stakes gamblers] do not want their identities and money to be exposed,” a former casino employee explains. “They gamble remotely via telephones, and so it is not necessary for money to be passed on the gambling table.”
The authorities have been targeting the hidden multipliers because they help players to dodge the gaming tax. But in the meantime Macau’s government has been trying to get its own house in order, following the arrest of Ho Chio Meng, the former Prosecutor General, late last month. The allegation is that Ho and a few of his colleagues took kickbacks on contracts for the Public Prosecutions Office for more than a decade, pocketing at least $5.5 million.
Ho’s case is an embarrassing one as he was head of the anti-corruption bureau when Macau was under Portuguese rule and was once rumoured to be in the running for the role of Chief Executive, the territory’s top political job.
André Cheong, the current Commissioner Against Corruption, told reporters that Ho is being investigated for misconduct in the tendering process and that there is no evidence that his duties as chief prosecutor were compromised.
“I believe such incidents happening inside the Office are unfortunate,” Cheong acknowledged. “But the case does not involve the judicial operations of the Office or affect the justice and fairness of its jurisdiction.”
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