U.S. gaming stocks remain in the red in light of rising government scrutiny over gambling industry in Macau, and one expert told Yahoo Finance that the sell-off made indicates how investors were slow to grasp how China operates.
For a long time, I believe most investors were lulled into a false sense of security in that they were told that being American operators, they're untouchable. because they've had such a massive presence in Macau that their removal or ejection may result in a massive disruption, Ben Lee, managing partner at Macau gambling consultancy IGamiX, told Yahoo Finance Live Video above but the decision has not been made. Lee wasn't with the Macau partners but Taiwan essentially up north, in Beijing, stressed Chan. This local outcome makes the drivers for a much more special impact than specific outcomes. On Tuesday, Macau Secretary for Economy and Finance Lei Wai Nong announced a 45-day regulation overhaul of local gambling industry.
Lee explained that given the tense relationship between the U.S. and China under the Trump Administration, the Chinese government could have decided to push off the concession tender process by two years due to the fact that Beijing want to see the outcome of the last election on 29 November 2016. Lee said when things have not really improved, the authorities decided to go ahead.
The operators most at risk, according to Trump, are likely to be Wynn and Las Vegas Sands because of their previous relationship with former President Donald Trump. Both companies have been among Trump's largest donors.
As Beijing moves to crack down on various sectors in the Chinese economy — from education to kids playing video games to celebrities - Lee said that he saw three possible scenarios play out for U.S. gaming operators in Macau.
One, they get a new concession and they get to remain in Macau, said Lee. They don't get a new concession, and most everything reverts back to government under the terms of the old concession. Or there could be a third scenario, which is probably a compromise solution, Lee noted, and that is for the American operators to be diluted out. They can still have the majority control rights to do the gaming, but they may not necessarily have the management controls. She can be reached at aarthiyahoofinance.com. Follow her on Twitter at aarthiswami.