Australia’s Crown Resorts says 18 staff detained in China

james-packerAustralia’s biggest casino company, Crown Resorts Ltd, on Monday said China had detained 18 of its employees including three Australians, sending Australian gaming stocks tumbling on concerns about their strategy for luring Chinese gamblers.

The Sydney-listed company, 53 percent-owned by billionaire James Packer, said it had not made contact with its employees, including Australia-based head of international VIP gambling Jason O’Connor, and was not aware why they had been detained.

China’s foreign ministry did not immediately respond to a request for comment.

Crown shares fell 11 percent and Star Entertainment Group Ltd shares dropped 6 percent in early trading, as the detentions cast doubt on their ability to attract wealthy Chinese gamblers to major new developments in Australia.

The Melbourne-based company, which holds a 27 percent stake in Melco Crown Entertainment Ltd based in the Chinese territory of Macau, does not directly run casinos in China but relies heavily on Chinese gamblers at its Australian operations.

Vitaly Umansky, an analyst at Bernstein in Hong Kong, said that although authorities had given no reason for the detentions it “looks to be a replay” of China’s crackdown on Korean casino marketing efforts last year.

Thirteen South Korean casino managers were arrested in China in 2015 for offering Chinese gamblers free tours, free hotels and sexual services.

Gambling is illegal in mainland China, except for heavily regulated state-sanctioned lotteries, and casino operators are not allowed to advertise in the mainland.

On top of casinos in the cities of Melbourne and Perth, Crown is planning a A$2 billion ($1.52 billion) gaming resort on the Sydney waterfront, targeted largely at Chinese tourists.

“The inferred underlying meaning (of the detentions) is that the crackdown on Chinese gambling is only likely to increase,” said Evan Lucas, a strategist at IG Markets.

“It’s getting harder and harder to see how you continue to do business in that space when regulatory increases are clearly the highest risk factor.”

The Crown staff were held following raids on the houses of Crown staff in Shanghai, Beijing, Guangzhou and Chengdu, the Australian Financial Review reported on the weekend. Crown did not comment on the circumstances of the detentions.

O’Connor was being held at the main detention center in Shanghai, the newspaper said.

Packer stepped down as co-chairman of Melco Crown earlier this year, as a Chinese government corruption crackdown put the brakes on gaming revenues in Macau, the only city in China where casino gambling is legal. (Courtesy Reuters)