(Bloomberg) -- Macau’s casino industry is under scrutiny again with the arrest of the head of the world’s biggest junket.

The detention of Suncity Group Holdings Ltd. CEO Alvin Chau marks the first time such a high-profile figure in the gaming industry has been targeted. Wynn Macau Ltd. tumbled 10%. Sands China Ltd. and Galaxy Entertainment Group Ltd. sank almost 8%.

Although VIPs have become less important to casinos in Macau, accounting for just 15% of earnings in 2019 according to Citigroup Inc., the arrest comes as investors and analysts alike had turned more bullish on the industry. A Bloomberg gauge of the six large operators entered a bull market this month, and Credit Suisse Group AG and JPMorgan Chase & Co. upgraded their ratings for the sector.

In notes published after the warrant was issued, JPMorgan and Citigroup said the arrest will hurt investor sentiment toward the industry, although they played down the impact on casino earnings. 

“A near-term share price correction could present an enhanced buying opportunity,” Citi’s George Choi wrote in a report, citing the industry’s fading reliance on junkets and positive catalysts such as a potential reopening of border with Hong Kong. 

The VIP segment is likely to account for just 1-4% of operators’ earnings in 2023, JPMorgan analysts led by DS Kim wrote in a note dated Saturday.

Macau’s judiciary police said Sunday that Chau confessed to establishing overseas gambling platforms and carrying out illegal virtual betting activities. Macau’s gaming regulator reviews the licenses annually and will unveil the list of successful junket applicants in January. Suncity suspended trading in its Hong Kong shares on Monday. 

“Mr. Chau is arguably the biggest (and certainly most famous) figure in the junket industry, as the founder/CEO of the undisputed biggest junket in the world,” JPMorgan’s Kim wrote. “So the fact that even he can be arrested – for just running the junket and doing (what seems to us like very) normal junket activities – should send a chill down the spine of any and all junkets, in our view.”

News of his arrest warrant, which came after Hong Kong trading hours last week, sent Melco Resorts & Entertainment plummeting 10%, Wynn Resorts 6% lower and Las Vegas Sands down more than 5% in U.S. trading on Friday. 

The gauge of Macau casino stocks is still down more than 40% this year, on pace for the worst annual performance since the China stock bubble burst in 2015. Shares tumbled on Friday amid concern the emergence of a new coronavirus strain will curb earnings.

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