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China's Crackdown on Philippine Casinos Hits the Property Sector

China's Crackdown on Philippine Casinos Hits the Property Sector

(Bloomberg) -- China urged the Philippines to stop its casinos from hiring Chinese citizens as part of a wider crackdown on cross-border gambling and illegal funds flow, a move seen to hurt the Southeast Asian nation’s property companies.

Megaworld Corp., the biggest lessor of office space to offshore gaming operators, had the worst performance in the Philippines’ benchmark index on Thursday, dropping the most in two years.

The Chinese embassy in the Philippines said in a statement that overseas gambling by Chinese is illegal, as is opening casinos overseas to attract Chinese citizens. A large number of Chinese citizens have been “illegally recruited and hired” in the Philippines, while “hundreds of millions of Chinese yuan” have illegally flowed to the Philippines, the statement said.

The remarks are the strongest warning from China against the Philippines’ flourishing casino sector that’s targeting and also employing tens of thousands of its citizens since President Rodrigo Duterte awarded more gaming licenses under his term.

More than 50 Philippine Offshore Gaming Operators or POGOs have received licenses since 2016, and the industry that caters mainly to overseas Chinese punters employs about 138,000 mostly Chinese workers. Oriental Group, one of the operators licensed by the Philippine Amusement & Gaming Corp., is building online gaming hubs in Cavite City in the south and in Clark City in the north.

Megaworld shares fell 5.9%, the most since June 2017. Shares of Belle Corp. and SM Prime Holdings Inc. dropped 0.9% and 0.8%, respectively. The Philippine property index erased gains from earlier in the day, ending down 0.5%.

“Obviously, the biggest impact will fall on the property sector, especially the big names with a significant portion of their net income derived from POGO leasing,” said Rens Cruz, an analyst at Regina Capital in Manila.

To contact the reporters on this story: Claire Jiao in Manila at cjiao5@bloomberg.net;Andreo Calonzo in Manila at acalonzo1@bloomberg.net

To contact the editors responsible for this story: Cecilia Yap at cyap19@bloomberg.net, Clarissa Batino, Jeff Sutherland

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