GGRAsia – No sign of sustained Macau UnionPay clampdown: analysts

No sign of sustained Macau UnionPay clampdown: analysts

Jun 26, 2018 Newsdesk Latest News, Macau, Top of the deck

The reported removal earlier this month of China Union Pay Co Ltd payment terminals from some retail premises in some Macau casinos seems neither to be part of a sustained campaign of enforcement against a source of cross-border cash for gamblers, nor a meaningful dampener on gambling volume in that city.

So said respectively two brokerages in notes issued on Monday.

“Most if not all of our contacts indicate that the impact has been virtually negligible so far, as players are finding other ways (legal and illegal) to obtain liquidity,” stated analysts DS Kim and Sean Zhuang of JP Morgan Securities (Asia Pacific) Ltd in a Monday note.

The institution estimated that Macau’s June casino gross gaming revenue (GGR) would register expansion in the 20s of percent judged year-on-year, back to the sort of growth levels seen in March and April.

Harry Curtis, Daniel Adam and Brian Dobson, of Japanese brokerage Nomura, said in a Monday memo, forecasting circa 20 percent year-on-year growth in Macau June GGR: “We believe the latest UnionPay terminal removals and World Cup have had little (if any) impact on Macau GGR so far.”

The latter was a reference to the 2018 FIFA World Cup soccer tournament being held in Russia. A reduction in Macau casino betting volume is said typically to coincide with major soccer tournaments, possibly either because some players put money into sports betting channels outside Macau casinos, or some VIP players are taken to the tournaments by junket agents as a customer perk.

JP Morgan wrote regarding the UnionPay issue: “Our on-the-ground checks reveal that some (not many) of the jewellery shops inside casinos have actually resumed UnionPay services recently, although they seem more cautious than before in offering such services (this could be because they may be utilising illegal mobile point-of-sale machines, though we couldn’t verify this).”

The institution added: “This, along with the fact that there was no follow-up clampdown thus far, probably suggests that it was an isolated incident and ‘more bark than bite’, in our view.”

The methods by which mainly mainland China consumers are said to use UnionPay services to convert their mainland currency-denominated funds into Hong Kong dollars – the currency in which overwhelmingly casino bets in Macau are denominated – is said by analysts to vary. One is the purchase, typically via UnionPay-linked bank cards, of high-value goods such as watches or jewellery, and then their return for a cash refund. Another is to gain access to unauthorised point-of-sale devices that mimic transactions occurring in China rather than Macau. The fee charged on mainland transactions via UnionPay is reportedly lower than on Macau transactions.

Nomura had expressed concern in a note earlier this month that the apparent crackdown on use of UnionPay point-of-sale machines in pawnshops or jewellery shops inside Macau casino premises could mark a governmental policy change regarding greater control of mass-market gambling to match that applied to high-stakes VIP play.

In early June, after news broke of the reported enforcement against some UnionPay terminals, Macau’s financial regulator, the Monetary Authority of Macao, issued a statement to the effect there was no ban on UnionPay being used in Macau pawnshops. It mentioned, among other things: “Banks are obliged to perform adequate due diligence on, and ongoing monitoring of, the merchants in order to prevent the abuse of POS machines [for] illegal activities.”