Three out of the six major operators in Macau are owned by US-listed companies

Could casinos in Macau get caught up in the crossfire of an escalating trade war between the United States and China? Beijing could put pressure on operators with a US parent in a number of ways, according to analysts.

“The US casinos are sitting on a geopolitical fault line,” said Steve Vickers, a former head of the Royal Hong Kong Police Force’s criminal intelligence bureau for 18 years, and now chief executive of political and corporate risk consultancy, Steve Vickers and Associates.

“Should relations [between China and the US] deteriorate further, Beijing may ask itself why it needs to tolerate so much money being repatriated by the US casinos,” he told the South China Morning Post via email.

“It would surely be better from Beijing’s perspective that the gaming proceeds go to more loyal and local champions, not foreign firms. And especially not to those controlled by China’s main economic rival,” he said.

The Trump Administration on July 6 imposed 25 per cent duties on US$34 billion worth of Chinese imports, with China retaliating with the imposition of duties on US goods, including soybeans and cars, of the same value, effectively igniting a long anticipated trade war between the world’s two largest economies.

Of the six major operators in Macau, three are owned by US-listed companies. Wynn Macau, Sands China and MGM China are owned by Wynn Resorts, Las Vegas Sands and MGM Resorts International, respectively.

And the stakes are high for these foreign players, as they derive a significant part of their revenue from Macau. For instance, Wynn Resorts draws 69 per cent of its revenue from the special administrative region, and has the greatest exposure to China among US companies larger than US$3 billion, according to analysis by Morgan Stanley equity strategist Michael Wilson and his team in June. Las Vegas Sands draws 65 per cent of its revenue from Macau, according to the study.

Beijing could target the US casinos with social media campaigns calling on punters to gamble more “patriotically”, while limitations on visas to Macau was a more unlikely move as it would hurt all casinos, said Vickers.

China could also pressure the US-owned operators into partnerships with Chinese companies, or the transfers of shares, in a bid for local players to slowly expand their stakes and ultimately displace US interests, he added.

Clifford Kurz, an analyst at S&P Global Ratings, however, said the impact of the trade war was likely to be felt by the whole gaming sector, and not just individual casinos.

“Some high-volume, VIP players could face a more severe economic impact, depending on their personal financial exposure. This could lead to fewer VIPs making the trip to Macau and, in a harsh scenario, a decline in consumer sentiment,” said Kurz.

Shares in Wynn Macau, MGM China and Sands China declined on Wednesday, and the companies did not reply to requests for comment.