The response has been swift to the Hong Kong Stock Exchange's decision to lift a long-standing ban against the stock listing of gambling companies and allow listed companies to invest in that industry.

The decision has set the stage for cash-rich gambling companies in Macao and around the region to seek financing in Hong Kong.

Hong Kong newspapers reported Thursday, March 13, that the Venetian Group, run by Las Vegas tycoon Sheldon Adelson, had appointed Goldman, Sachs & Co. as financial adviser to seek financing sources in Hong Kong of as much as HK$4.4 billion ($564 million). Goldman Sachs did not return phone calls seeking comments.

The Venetian Group won a gambling license in Macao last year after forming a consortium, Galaxy Casino Co., with Hong Kong property tycoon Lui Che Wo, chairman of the listed K Wah International Holdings Ltd. The Galaxy group also enlisted two other Hong Kong businessmen, Alfred Tsai and Peter Ho On Chun, as shareholders. They plan to open their first casino later this year to be followed by a convention center, an arena and a group of hotels.

Adelson, who runs the Venetian Resort in Las Vegas, has said he plans to build a similar casino in Macao including a shopping mall and canal with singing gondoliers. He also plans restaurants and more.

In addition, Las Vegas gambling impresario Steve Wynn is also looking to establish casinos in the area. Both he and Adelson had received licenses for their operations to begin this year. Wynn plans to spend $497 million on casinos in the next seven years.

Then there is local Hong Kong tycoon Stanley Ho, who ruled a 40-year gambling monopoly in Macao until April 2002 when the local government opened the lucrative gaming industry there to foreign investors by giving licenses to Wynn and Adelson. Ho is also seen as a likely candidate to seek to list his privately-held Sociedade de Turismo e Diversoes de Macau, which controls his 11 casinos.

The South China Morning Post, the major Hong Kong English newspaper, reported Thursday that Ho is in advanced preparation for an initial public offering in Hong Kong. But his spokeswoman, Janet Wong, said he is still studying the implications of the new policy. Published reports have said Ho plans to spend $585 million to renovate his casinos and build a theme park.

"Basically, casinos and gaming companies are popular among investors. They tend to generate a lots of free cash flows and pay high dividends," said Stephen Corry, a market strategist at Merrill Lynch & Co. "The problem is, their earnings forecasts are going down." Top among investors' concerns are regulatory risks and organized crime, which is considered rampant in Macao and replete with loan sharks and prostitution.

Kwong Ki-chi, chief executive of Hong Kong Exchanges and Clearing, announced the policy change in a statement Tuesday. He said the decision to lift the ban was a result of a review process carried out after receiving inquires from interested parties and subsequent consultation with related government authorities.

Located 40 miles west of Hong Kong, Macao is a $2.5 billion gaming market that Portugal governed for 442 years before giving back to China in 1999, when it became the Macao Special Administrative Region.

The Hong Kong stock authority cited two prerequisites before it would allow gambling companies to be listed or permit listed companies to invest in gambling. First, the gambling activity must take place outside Hong Kong. Second, the bookmaking transactions and the parties to the transactions also must be outside Hong Kong.

Due to the ban against listing of gambling companies by HKEX, companies such as Star Cruises Ltd. have not included its gambling operation under its Hong Kong listed stock. The only Hong Kong listed company remotely linked to a gambling business is Shun Tak Holdings Ltd., which is 45% controlled by Stanley Ho. But in Shun Tak's case, it draws the bulk of its revenues from cross-ocean ferry services between Macao and Hong Kong, not from gambling.

Analysts said cash-rich gambling companies have long been market favorites due to their ability to turn in free cash flow and high profits. Among them are Malaysia-listed Genting Bhd. and its subsidiary, Resorts World, both controlled by Tan Sri Lim Goh Tong, a Malaysian Chinese businessman. Tan also owns substantial stake in Star Cruises.