(Bloomberg) -- Philippine President Ferdinand Marcos Jr.’s order to ban online casinos targeting Chinese bettors triggered a slump in property stocks on Tuesday, as the shutdown could render many office spaces vacant.
The Southeast Asian nation’s property index closed 1.6% lower, with developer DoubleDragon Corp. and its real estate investment trust, leading the slump with losses of more than 5% at the end of the trading day.
SM Prime Holdings Inc., Filinvest REIT Corp., and Robinsons Land Corp. all declined more than 2% at the close. The benchmark stock index was up 0.6%.
Marcos ordered authorities to shut Philippine offshore gambling operators, or POGOs, by yearend during his Congress speech on Monday, following public scrutiny triggered by a Senate probe. The president said these facilities — which boomed during the administration of Rodrigo Duterte — have stoked crimes including money laundering and human trafficking.
The ban on POGOs may affect the real estate industry as they account for 11% of total gross demand for commercial office space in the country, said Wendy Estacio-Cruz, an analyst at Unicapital Securities.
“However, this is down from last year and from 2019 peak at 25% of total demand. We believe this should affect general sentiment on the property stocks,” she said.
The exposure of property companies to the offshore gambling industry is small, but office vacancy rates could increase and pressure rental rates, according to April Tan, head of research at COL Financial. “Nevertheless, any negative impact is already priced in given depressed valuations of prop stocks,” she said in a post on social media platform X.
SM Prime also doesn’t see any significant impact from the ban, its chief finance officer John Ong said in a phone interview, adding that the company can lease out the vacated space to other businesses. POGO service providers make up 1% to 2% of the company’s leasable office space compared to 8% before the pandemic, he added.
The ban will not significantly affect the economy, Finance Secretary Ralph Recto said in a statement Tuesday, adding that the sector’s estimated economic costs including risks to investments and tourism outweigh its benefits like tax and gaming revenues.
In terms of jobs, some 25,000 local employees could be affected by the shutdown, based on a Department of Finance position paper. “Other similar sectors are more than capable of accommodating them given their technical skills, particularly in the business process outsourcing industry,” the agency said.
--With assistance from Cliff Venzon, Eduard Gismatullin and Ditas Lopez.
(Adds comments from analyst, finance agency.)
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