Macau VIP headwinds continue: Tony Tong

Macau’s VIP market will remain under pressure, said Tony Tong during a CLSA week-long roadshow.

Mr. Tong, who is vice chairman of the recently formed junket association MGIA, said junkets are slowly giving up on Macau, players are preferring regional markets due to less scrutiny, casinos continue to allocate less resources and capital to the VIP segment, and credit extension appetite remains weak due to a backlog of NPLs with low recovery rates.

According to Tong, regional casinos are starting to become more competitive because of lower taxes, higher commission rates, and a “more conducive environment for credit-induced games”.

Hengsheng, a major Macau junket, said they now do more business outside of Macau than within Macau, said Tong.

The conclusions reaffirm CLSA’s VIP forecast of -8 percent in 2016.

Recently, Bloomberg reported that the Macau government is working on a proposal that could see the capital requirements for new junket operators increase 100-fold.

One proposal includes raising capital requirements for new junket operators to MOP10 million (US$1.3 million), from MOP100,000, and also requires at least one shareholder to be a Macau resident.

The new rules, although will not affect existing licensed providers, represent even stronger headwinds for Macau’s already flailing VIP market.