Macau casino operator Melco Crown's planned exit from the Hong Kong stock market sparked fears about the health of casinos operating in the world's largest gambling hub amid sliding revenues, but experts dismissed worries of a domino effect.
Late on Friday, Melco Crown Entertainment said it will apply to delist from the Hong Kong Stock Exchange (HKEX), citing limited fundraising opportunities, compliance obligations as well as limited trading volume compared with its U.S. shares. Melco Crown is a joint venture between Hong Kong gaming tycoon Lawrence Ho and Australian billionaire James Packer and has been dual listed on the Nasdaq and HKEX since 2011.
The announcement sent its American Depositary Receipts (ADRs) tumbling as much 5 percent on Friday and Hong-Kong listed shares down 6 percent on Monday.
The announcement comes amid a severe downturn for Macau's gambling environment as mainland China cracks down on high rollers, corruption and money laundering. The city's December gross gaming revenues (GGR) tanked 30.4 percent on year, official data showed last week, adding up to a 2.6 percent decline in 2014 annual revenue - the industry's first-ever decline.
Fitch forecasts negative 4 percent GGR for 2015, with the first half of the year expected to bear the brunt of the pain before stabilizing in the second half. Barclays is more optimistic, expecting a return to positive growth in the second half.
"I don't think there's anything sinister going on in the delisting of the Hong Kong entity," said Nicholas Studholme-Wilson, vice president and senior research analyst at Sun Hung Kai Financial.
Melco Crown's decision to delist is based on technical reasons unique to the company and isn't reflective of other casinos, he added: "If you've actually looked at the trading volume of this stock, no institution could ever deal in this counter. It's ridiculously illiquid and at this day, it's so easy to deal in U.S. stocks if you live in Hong Kong so you might as well just have one listing."