Billions of dollars has been wiped off the value of Asian gambling companies in the wake of the surprise arrests of 18 executives employees of James Packer’s Crown Resorts (CWN) in China late last week.
The move is believed to be linked to a legal blitz launched by China last year against foreign casinos that contravene its laws by seeking to lure its citizens overseas to gamble.
The staff, including three Crown executives, were detained in a series of overnight raids on Thursday and Friday.
And if overnight media reports are true with the 18 about to be charged by Chinese authorities, Crown shares and those of other companies in the gambling sector, face another day of pressure today.
Crown shares lost more than $1 billion as the shares fell 13.9% to close at $11.14, the lowest the shares have been since later 2015.
The sell off in Crown and other gambling stocks saw the ASX 200 end 45 points, or 0.8%, lower at 5388.7, closing below 5400 for the first time in almost a month.
James Packer, the biggest shareholder, saw his fortune shrink by more than $600 million dollars yesterday as the reason for the arrests remained unknown.
Analysts say the problems have the potential to impact Crown’splans for its Barangaroo casino and apartment building in Sydney and a casino complex in Queensland. With Chinese mainland high rollers, both projects are questionable.
Star Entertainment Group (owners of casinos in Sydney and Queensland), saw its shares lose 3.6% to $5.52. Sky City, the NZ gaming group with casinos in both countries, saw its shares lose nearly 4% to $4.18. And Tabcorp shares lost 1.4% and Tatts shares saw a 1.3% fall.
The fallout from the raids at Crown reverberated in Hong Kong’s where Sands China, lost 4% or more at times,, Galaxy Entertainment Group was off 4.1% and had been down as much as 4.7%.
Both companies operate casinos and resorts in Macau, the only place in China where casinos are allowed, and where Crown has a stake in Melco Crown in two casinos, plus one in Manila, the City of Dreams.
MGM China Holdings and SJM Holdings, both Macau casino operators saw their shares down more than 4% at stages yesterday.
“This is a clearer signal to all casino operators and junkets in the region, that the Chinese government doesn’t like gambling and will continue the crackdown on the industry and capital outflow," said Tony Tong, founder of Hong Kong-based risk management consulting firm Pacific Financial Services Ltd.
And Crown said in a statement to the ASX that, to date, it "has not been able to speak with its employees and is working closely with the Department of Foreign Affairs and Trade to urgently make contact with and ascertain the welfare of its employees.
Crown added it has “yet to be provided with details of why its employees have been detained.” But Fairfax Media reported last night that “Police are preparing to charge the 18 Crown Resorts employees arrested across China, including three Australians, with organising gambling activities for mainland nationals overseas.”
“Sources familiar with the investigation told Fairfax Media the line of inquiry has focused on the sales and marketing activities of the 18 staff of James Packer’s casino empire, and the inducement and facilitation for Chinese nationals to travel to Australia to gamble."
"Under our country’s laws, it is not just gambling and opening casinos in China which fall under gambling crimes," said one source, who declined to be named because of the sensitivity of revealing aspects of an ongoing investigation. "If you organise or introduce our country’s citizens to go overseas to gamble, if it’s more than 10 people then you will face criminal liability."
“The revelations are damaging for Crown, and raise serious questions over the risks to which it has subjected its China-based staff by having them operate right on the fringes of what is legal in the country in order to lure lucrative high-rollers from mainland China,” Fairfax reported.
