(Bloomberg) -- JPMorgan Chase & Co. analyst DS Kim downgraded the six big Macau casino operators to sell or neutral weightings after officials in the Chinese enclave said they were beginning discussions about new concession terms that could place tighter restrictions on management.

Officials in the region, the only place in China where casino gambling is legal, said they would begin a 45-day public consultation period on Sept. 15 to discuss the new licensing. Among the topics being covered: how many concessions will be allowed, how long their terms will be, and the level of supervision by the government.

Kim changed his recommendations on Sands China Ltd., Wynn Macau Ltd. and Melco International Development Ltd. to underweight from overweight, and his positions on Galaxy Entertainment Group Ltd., SJM Holdings Ltd. and MGM China Holdings Ltd. to neutral from overweight.

“We think this announcement would have already planted a seed of doubt in investors’ minds, which is probably enough to de-rate these names until clarity emerges on key points,” he wrote in the research note Wednesday.

Read more: Gambling Stocks Tumble as Macau Flags More Government Scrutiny

Macau, the world’s largest casino market, has been hard hit by the pandemic, which prompted the government to restrict travel. Renewal discussions for the concessions had been expected for some time, but the comments from the local finance and casino authorities raise the specter of more regulation in a country that already has seen tighter control of businesses from movie production to video games.

Among the items officials discussed in a press conference Tuesday were tighter controls on the distribution of dividends, greater participation by locals in the concessions and government representatives directly overseeing the businesses, Kim noted.

Jason Ader, the chief executive officer of New York-based investment manager SpringOwl Asset Management and a former Las Vegas Sands Corp. board member, said he thought casinos operators will likely see the restrictions being proposed as not so bad. He said it was unlikely an operator like Sands would lose its license, although the overall climate for foreign companies in the country isn’t great.

“It’s sort of all going in the wrong direction in China,” Ader said. “The casino issues are a continuation of what’s been a pretty big crackdown.”


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