Wynn, Las Vegas Sands Tumble on China’s Casino Crackdown

(Bloomberg) -- U.S. casino firms with exposure to Macau tumbled on Wednesday, extending a slump that started in the prior session after officials in the Asian gaming hub said they would tighten restrictions on operators.

Wynn Resorts Ltd. suffered its biggest two-day rout since March 2020 in New York. Las Vegas Sands Corp. dropped 1.7%, while Melco Resorts & Entertainment Ltd. sank 14% and MGM Resorts International slipped 2.5%. 

Wednesday’s selloff started in Asia, where Macau’s top gaming stocks listed in Hong Kong lost a record $18.4 billion in combined market value. Officials said changes to casino regulations would include appointing government representatives to “supervise” companies in the world’s biggest gaming hub.

“It’s another concerning action of increasing regulation aimed at some of the higher growth parts of the economy,” said Greg Taylor, chief investment officer at Purpose Investments. “It will probably make investors even more hesitant to expand investments in China.”

A Bloomberg Intelligence index tracking big Asia peers plunged 23%. Officials in the enclave -- the only place in China where gambling is legal -- announced that they would begin a 45-day public consultation period to discuss legal revisions. 

What Bloomberg Intelligence says:

“The Wynn and Sands selloffs may be justified based on a possible worst-case outcome of the gaming-law review. Curbs on dividends and non-gaming investment requirements could crimp casino junkets, while renewed licenses -- with foreign ownership under scrutiny -- might be shorter than the initial 20-year terms.” 
-- Brian Egger, BI gaming industry analyst, Click here to read the Wynn research report and here to read the Las Vegas Sands note.

Selloff spreads

The latest clampdown is also hurting American depositary receipts of Chinese firms. The Nasdaq Golden Dragon China Index fell for a sixth consecutive day.

The newest iteration of regulatory scrutiny is punishing the gambling capital of the world, with the repercussions being “felt globally,” said Edward Moya, senior market analyst at Oanda Corp. “Foreign investors are growing frustrated with all the Chinese crackdowns and uncertainty as to how much further officials will go.”

Shares of e-commerce companies also slid after China reported weaker-than-expected retail sales figures for August. Tencent Holdings Ltd., Alibaba Group Holdings Ltd. and JD.com Inc. fell by more than 1.4% each.

Meanwhile, Yum China Holdings Inc. tumbled after the restaurant operator warned that its third-quarter profits could fall by up to 60% as a result of the latest Covid-19 outbreak in China.

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