The former Portuguese enclave of Macau certainly has its ups and downs. The gaming monopoly held by Stanley Ho for 40 years was broken in 2002 but he has not retired gracefully from the competition. On December 23rd he opens his Greek Mythology Casino, complete with statues of gods and goddesses, and last week his Melco International Development company signed a deal with Australian Kerry Packer’s Publishing & Broadcasting Limited (PBL) to develop another hotel and casino.

Macau is booming with new construction and a massive influx of tourists, many from the Chinese mainland after China removed travel restrictions. Last May Sheldon Adelson opened the Sands Macau casino and the Wynn Macau should be completed in 2006. The Las Vegas Sands Group has recently announced plans to spend $1.8 billion in building the biggest casino in Macau to resemble the company’s flagship property in Las Vegas, the Venetian. They are predicting that Macau profits will be greater than those of Las Vegas by next year.

All this points to a considerable rise in the value of gaming stocks, and has triggered the fervent buying of microcap stock. These companies have low capitalization - the total value of their stock - and limited assets. Accurate information about these microcap stocks is frequently difficult to find as most do not file financial reports. The lack of facts about a company’s products, management, services, and finances creates the opportunity to spread false information that lets criminals make profits from unwary investors.

In Macau the recent sharp decline in gaming stocks has been caused by speculation that an enquiry by the Securities and Futures Commission (SFC) would find irregularities in the manner in which gaming shares have increased so much in value. The SFC has started to query the actions of brokers and to look into the announcements made by some companies. They will follow up any misleading disclosures and investigate any evidence of a company making false statements or manipulating the market.

Stanley Ho’s Melco is one stock bucking the trend. It gained around 35% in trading after it made public its deal with PBL, although it was perhaps playing catch-up with the rapid rally of concept stocks that began in October. That rally has now changed direction, but Melco remains strong and Stanley Ho's expansion plans march onwards.

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