Citibank analysis shows that Macau’s high rollers are still able to get their funds into casinos despite a crackdown on money exchange services. [Image: Shutterstock.com

Macau defying exchange crackdown

Macau’s premium mass segment has not been affected by China’s recent crackdown on illegal money exchange services, according to analysis from Citibank.

A note from research analysts George Choi and Ryan Cheung stated that Macau had seen an increase in both year-on-year and month-on-month betting in the premium mass market.

In total, Citibank’s analysis showed a 35% year-on-year increase in premium mass total betting, to HK$12.8m (US$1.6m) for August, across 655 high rollers.

most players, via legitimate channels, are still able to get their funds to the Macau casinos”

“The fact that this happens after the Macau government’s decision to criminalize illegal money exchanges within casino premises means that most players, via legitimate channels, are still able to get their funds to the Macau casinos,” said Choi and Cheung in the note.

“August is seasonally one of the strongest months in terms of visitation, and historically GGR in August is usually driven by player count. The 40% year-on-year higher player count this month likely implies that there were more casual premium mass players returning.”

Macau’s money exchange loophole

Moving money through Macau casinos via money exchange services has been a common way to get cash out of China for years, as a way to circumvent the country’s strict capital controls.

In the note, the analysts spotted one whale gambling HK$600,000 (US$77,000) per hand at Dragon Palace at the City of Dreams casino, with his friend seated next to him also betting HK$400,000 ($51,300) per hand.

These can be typical limits for those wishing to move large amounts of money out of the country via Macau’s casino tables.

In June, however, the Chinese government announced a crackdown on the practice, and earlier this month also announced that any unauthorized currency exchanges taking place within casinos would be punishable by up to five years’ imprisonment. The law also widened the definition of a casino’s premises to include entertainment, business and hotel facilities.

Citi claims Macau fears unfounded

When the crackdown was announced, shares in Macau casino stocks like Galaxy Entertainment and Sands China plummeted, as investors feared that many high rollers would be unable to get their money into the casinos.

Choi and Cheung had written that the fears were likely to be overstated

However, earlier in July, Choi and Cheung had written that the fears were likely to be overstated, pointing out that whales still had plenty of legitimate channels to get sufficient funds into Macau.

While reports that Macau detained thousands of individuals involved in unauthorized money exchanges suggested a high demand for the services, the pair pointed out that premium mass players were unlikely to be using the services as their main method of exchanging currency.

Instead, a small slump in overall casino activity in July was likely a simple “seasonal trough,” according to the pair.