China's Latest Crackdown on Underground Banking Seen Hurting Junkets in Macau - Deutsche Bank (MPEL) (LVS) (WYNN) (MGM)

Deutsche Bank analyst Karen Tang warned a crackdown on underground banking may further hurt junket liquidity. Related stocks in the US include Sell-rated Melco Crown Enter. (NASDAQ: MPEL), and MGM Resorts (NYSE: MGM), Las Vegas Sands (NYSE: LVS), and Wynn Resorts Ltd (NASDAQ: WYNN), which are covered by another analyst at Deutsche Bank.

Tang explained, "China’s Ministry of Public Security is launching a campaign, from now until the end of November, to crack down on the underground banking network, particulary with respect to cross-border money flows. We think this campaign is the result of China's efforts to control capital outflows, especially after the recent RMB depreciation. Many Macau junkets use the underground banking network to transfer money between Macau and China. As such, we see risks that junket liquidity may further tighten. Galaxy and Wynn Macau may be the most impacted given their high exposure to VIP (27-29% of EBITDA). Relatively, we prefer Sands for its mass exposure and solid 7.0% div yield."

"In April, the Chinese authorizes launched a campaign to crack down on illegal fund transfers through offshore companies and underground banks. To date, 66 illegal financial institutions have been busted, and over 160 suspects have been arrested, involving up to RMB430bn. For the next stage of the campaign, the authorities are to focus on: i) identifying targets to analyze evidence; ii) setting up special forces to prioritize and expedite important cases; iii) identifying upstream crimes, especially for financial crimes, corruption and terrorism; and vi) strengthening public awareness of how the underground banking network operates, and encouraging the public to use regulated channels for financial service," added the analyst.

For an analyst ratings summary and ratings history on Melco Crown Enter. click here. For more ratings news on Melco Crown Enter. click here.

Shares of Melco Crown Enter. closed at $17.81 yesterday.

You May Also Be Interested In

• TechnipFMC (FTI) PT Raised to $30 at BTIG
• Boston Scientific (BSX) PT Raised to $77 at Oppenheimer
• Northland Starts Bitfarms Ltd. (BITF) at Outperform