Macau Monetary Authority confirms UnionPay crackdown: Premium mass seen hit

The Macau Monetary Authority has confirmed it is stepping up supervision of the use of China UnionPay cards in pawn shops in a move analysts say is likely to impact the premium mass market.

The MMA in a statement Friday confirmed that it will be implementing real-time monitoring of mainland bank cards at high-risk merchants. It said the initial phase will focus on merchants near casinos, which are mainly jewellry and watch shops.

“The real-time monitoring system will be extended to other high-risk merchants selling high-value products in the second phase,” it said, adding that the focus initially will be on China UnionPay cards, but that will be extended at a later date to encompass Visa and Mastercard.

“The real-time monitoring system is designed with the aim to verify the genuine relationship between card holder and the bank card in the process of acquiring goods or services in order to protect the lawful rights and interests of cardholders, merchants and banks,” the statement said.

The MMA has requested Macau banks to implement enhanced due diligence, ongoing monitoring and enhanced training to merchants, as well as to the regular submission of information on high-risk merchants and the timely notification of suspicious transactions of merchants.

The crackdown comes amid concern about widespread abuse of the cards as a way of circumventing China’s stringent currency controls. They have been widely used by the mass and premium mass market as a way of accessing cash through Macau’s pawn shops.

The statement from the MMA followed a report of a China-wide crackdown in The South China Morning Post on Thursday.

“Net-net, while yesterday’s article left some ambiguity as to what would change and which segments of the market were most at risk, we think the specific mention of pawn shops around casinos leaves little interpretation,” Deutsche Bank analysts wrote in a note.

“As such, we believe mass market trends, specifically the premium mass segment, which has been soft, will draw considerably more scrutiny in the coming months / quarters as investors look to see an impact / fallout from the presumably changing way of doing business in Macau.”

Wells Fargo agreed that the added restrictions will be another negative factor for Macau’s operators.

“In our view, any restrictions support the view that policy settings remain tight – in particular, that Beijing remains focused on restricting capital outflows, which could pressure Macau gaming,” it said, adding early December checks show revenue trends remain weak.