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Casino Stocks Gain on Hopes of New Licenses to Operate in Macau

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By Dhirendra Tripathi

Investing.com – Casino stocks were gainers Thursday after issue of a consultation paper in Beijing rekindled hopes that they might be able to pursue their business in Macau.

While the paper hints at tighter regulations, hopes of business continuity with clear rules were propping up the shares. Current licenses for operating in the region, known as Asia’s Las Vegas, expire in June next year.

Melco Resorts stock (NASDAQ:MLCO) surged 6% while those of Wynn Resorts (NASDAQ:WYNN) and Las Vegas Sands (NYSE:LVS) were up 2.7% and 2.8% respectively. Studio City shares (NYSE:MSC) were only up .3% as of this writing.

The consultation paper came upon the conclusion of a 45-day forum held in the Chinese capital to address regulatory oversight, gambling license limitations and employee welfare. The paper carries comments from officials and a report by the Chinese government on promoting a sustainable and healthy gaming industry.

Morgan Stanley released a note in response to the news saying it expects status quo with six licenses in Macau with a validity of 10 to 20 years, dividend issuance still allowed, and taxes to be unchanged. "Yet, there will be increased oversight on operation and investment in non-gaming could be return dilutive," the note said.

Macau lies off Hong Kong and is part of China. Local authorities have earlier called for tighter supervision of casino operators and higher local ownership in gaming companies operating in the region.

China has been clamping down on high-stakes betting in Macau which takes place in convertible Hong Kong dollars. It is believed the gambling trades enable illicit outflow of currency and money-laundering efforts.

In the last year year, the Chinese government, in an attempt to develop a model state and cleanse the society of aspects it considers harmful to society, has capped the number of hours children can spend on online games and tightened ways the country’s tech companies can use consumer data, among other changes. Read more about the outlook for Chinese stocks and the regulatory changes here.

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