In its latest report on Hainan gaming, Union Gaming (UG) indicated that the Hong Kong-listed concessionaires in Macau saw a collective loss of $4.3 billion in market cap. The loss represents a 3.7% decline, and is a product of news that five hotels in Hainan could soon begin offering small, very low-stakes rooms for games such as baccarat. While the games are real-money games, the payouts are provided through resort amenities and other prizes.

The move comes following a recent verdict in a four-year-old court case involving the Sanya Bay Mangrove Resort. The Mangrove had been operating a similar game before it was shut down by police. This past December, a court in Hainan ruled that the operations didn’t break any laws.

UG analyst Grant Govertsen, who wrote the report, said of the new gaming options, “This is similar to the way pachinko operates in Japan – and we would take this one step further to say that the government of China will be paying close attention and will react quickly (and negatively for the hotel operators) should they begin to press their luck and do anything beyond low-stakes prize-oriented games; anything else would be in contravention of China’s constitution.”

Govertsen points out, however, that the introduction of gaming options in Hainan should not impact gross gaming revenue (GGR) trends for June. He also noted that there has been negligible fallout from the ongoing World Cup soccer games on Macau’s casino operations.