Shareholders of casino operator Crown Resorts Ltd (ASX: CWN) didn't have a great end to the week. Its share price dropped over 5% on Friday over concerns of further crackdowns on gambling in Macau.
Reports in the South China Morning Post revealed that the Monetary Authority of Macau planned to half the amount of cash UnionPay card holders could withdraw daily from ATM machines to just US$646.
The news caused casino shares across the world to sell off, with Melco Crown Entertainment's US-listed shares one of the worst hit. The casino group which Crown Resorts has a significant interest in fell almost 14%.
But the good news for Crown Resorts and other casino operators is that the reports were only half correct. According to Bloomberg regulators have not changed the daily limit for ATM withdrawals after all. Instead they have just halved the amount card holders can withdraw in a single transaction.
This isn't designed to combat gambling, but rather to stem a sharp increase in overseas ATM withdrawals. Due to the weakness in the yuan, mainland Chinese have been using ATMs in Macau to convert currency into the stronger Hong Kong dollar.
The changes now mean double the transaction fees to withdraw the daily limit. This is expected to make such transactions unappealing and put a stop to the practice.
Casino shares in the United States rebounded on Friday after the finer details of the changes became apparent. Crown Resorts shares have also rebounded a touch. In early trade they are higher by over 1% to $11.55.
Although things look a little more positive for Crown Resorts today, I wouldn't be in a rush to invest. Whilst these changes are unlikely to have a material impact on earnings in the world's largest casino market, it does show that the Macau market continues to be at risk from government intervention.
For this reason investors might want to be cautious with investments that have interests in the massive Macau market.
In my opinion investors that want exposure to the casino industry may be better off with an investment in Star Entertainment Group Ltd (ASX: SGR). Its operations are all in Australia and should benefit from the rapid rise in inbound tourism over the next decade.
