Government raids on Crown Resorts' offices in China have sent the company's share price plummeting nearly 14 per cent on Monday, cutting billionaire James Packer's paper wealth by about half a billion dollars.
At least eighteen Crown employees, including three top Australian executives, have been held since Chinese police executed a series of late-night raids at their homes across several mainland cities on Thursday. The company, consular officials and families have been unable to make contact with the group.
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The impact of China's raids on Crown Resorts
Elizabeth Knight comments on the potential impact to Australian businesses after a government crackdown on Crown Resort's offices in China.
Stock analysts are scrambling to figure out the ramifications of the Chinese crackdown on the Australian casino operator's earnings, with initial estimates suggesting about 5 per cent could be wiped from its profit.
Crown shares closed down 13.9 per cent for the day at $11.15.
The Chinese foreign ministry confirmed over the weekend the Australians detained on suspicion of committing "gambling crimes", without specifying how many. It said the case remained under investigation.
Shares in other casino operators in the region fell in response to the arrests
Crown's largest Australian competitor, The Star, did not escape the fallout - its share price fell more than 5 per cent but closed down 3.66 per cent.
Hong Kong-listed Sands China fell as much as 5.4 per cent, while Galaxy Entertainment Group Ltd. lost as much as 4.7 per cent on Monday.
![Monday's Crown share price plunge has cut billionaire James Packer's paper wealth by about half a billion dollars.](/web/20170103153458im_/http://www.watoday.com.au/content/dam/images/g/s/3/l/n/9/image.related.articleLeadwide.620x349.gs3w6m.png/1481847246822.jpg)
South Korea's largest operator of casinos for foreigners Paradise fell as much as 0.7 per cent in Seoul trading, while fellow Korean casino operator Grand Korea Leisure Co. declined as much as 0.9 percent. Melco Crown Philippines Resorts
Corp lost as much as 1.6 percent in Manila.
"This is a clearer signal to all casino operators and junkets in the region, that the Chinese government doesn't like gambling and will continue the crackdown on the industry and capital outflow," said Tony Tong, founder of Hong Kong-based risk management consulting firm Pacific Financial Services Ltd.
![It appears that the Chinese government has decided to make an example of Crown, which is the only Australian casino ...](/web/20170103153458im_/http://www.watoday.com.au/content/dam/images/g/p/k/c/a/1/image.related.articleLeadwide.620x349.gs3w6m.png/1476708086239.jpg)
"When the government's tone is clear, casinos and junkets need to work smarter in the market. It's dangerous
and risky to open offices, organize parties, send business cards and even collect gambling debts in mainland China."
Crown is the only Australian casino company will offices in China. The raids were conducted at a time when Crown's senior international VIP manager, Jason O'Connor, was in town in a move that looks designed to attract maximum attention and cause maximum damage.
![Jason O'Connor is the most senior of the Australians detained by Chinese authorities.](/web/20170103153458im_/http://www.watoday.com.au/content/dam/images/g/s/3/6/j/x/image.related.articleLeadNarrow.300x0.gs3w6m.png/1479682497490.jpg)
Australian casinos have based a large part of their growth strategies on attracting increasing numbers of Asian gamblers, particularly from China.
They have had huge success in this endeavour over the past few years as many of the big international gamblers have shunned Macau for fear of being caught in that crackdown.
Crown and other Australian casino firms pulled staff out of China over the weekend, said Jamie Soo, an analyst at Daiwa Capital Markets Hong Kong Ltd.
While gambling advertising and collecting gaming debts are illegal in China, they are "established practices" carried out by marketing teams, he said.
"They're all operating in a pretty grey area," said Theo Maas, a fund manager at Sydney-based Arnhem Investment Management, which owns Crown shares.
"You can't promote gambling in China directly, but obviously the ultimate goal is to get them to come and gamble
with you. You can see where the confusion lies."
Crown has received limited information from Chinese authorities, which have done little more than confirm the 18 staff have been detained.
"To date, Crown has not been able to speak with its employees and is working closely with the Department of Foreign Affairs and Trade to urgently make contact with and ascertain the welfare of its employees," it said in a statement to the ASX on Monday.
"Crown is endeavouring to provide support to the families of its employees in China and Australia."
The federal government declined to comment on Monday.
with Philip Wen and Bloomberg