Source: Lianhe Zaobao
November 21, 2022
Stock market strategist James Ooi informed Lianhe Zaobao that during the five World Cups since 2002, the average daily trading volume on the Singapore Exchange has dropped by an average of 13% to 23% compared to the annual daily trading volume for four out of those five World Cups.
The performance of the local stock market during the past five World Cups
The global football event, the World Cup, began on Sunday (November 20th). Analysts expect stock market trading to be subdued during the tournament, but the end-of-year holiday season that follows the World Cup generally benefits the market.
uSMART Securities (Singapore) Pte. Ltd market strategist, James Ooi, told the Lianhe Zaobao that from the five World Cups starting in 2002, the stock average daily trading volume on the Singapore Exchange has dropped by an average of 13% to 23% during the four tournaments.
However, lower trading volume does not equate to lower returns. The Straits Times Index has achieved positive returns during three of these tournaments.
On the other hand, the average daily trading volume in the US stock market increases during the World Cup. From 2006, the average daily trading volume on the New York Stock Exchange has been higher during three of the four tournaments, and the Standard & Poor's 500 index has also achieved positive returns.
Senior strategist of Philip Nova, Zhang Bao Luo, said that the impact of the World Cup on the market is inconsistent. Of the past four World Cups, the Straits Times Index and the Standard & Poor's 500 index have achieved positive returns in three of them. In 2014, when the World Cup was held in Japan, the Straits Times Index rose by 6.24%; in 2018, when the World Cup was held in Russia, the index fell by 9.82%.
He also found that the stock markets of the host countries of the four World Cups held in Russia, Japan, South Africa, and Germany have all seen gains during both the tournament period and the year as a whole. For example, the MOEX Russia Index rose 2.55% from June 14, 2018 to July 13, 2018, and 11.79% for the year. The Nikkei 225 Index rose 2.48% from June 13, 2014 to July 14, 2014, and 7.12% for the year. The South African and German stock markets also showed similar trends.
FSMOne.com Research and Investment Portfolio Management Division researcher Huang Tian Zhao believes that some important matches may cause a decrease in the day's trading volume in the stock market, but this is expected to have a greater impact on European and American trading sessions.
As for the relationship with stock performance, he said that there is a lack of data in this regard and it is difficult to determine the relationship between the World Cup and the stock market due to many other factors that affect the stock market.
Huang Tian Zhao also said: 'Some people think that the stock market of the country whose team loses in the World Cup will subsequently perform weakly, but there is no clear relationship between the two.'
He took the example of the teams that advanced to the finals of the past five World Cups, and the stock market performance of the champion team and runner-up team in the week after the event and that year were both up and down. Therefore, he emphasized that investors should not use the World Cup final's win or loss to trade in the stock market.
In the past, World Cups were held in June and July, but this year's event will be followed by the year end holidays.
Zhang Bao Luo pointed out that in general, higher consumer spending and pent-up travel demand during the end-of-year holidays will boost the stock market, benefiting leisure, catering, retail, tourism, and hotel industries.
Individual stocks benefit from World Cup
In terms of individual stocks that may benefit from the World Cup, James Ooi, a market strategist at uSMART Securities (Singapore) Pte. Ltd, said that Singtel and Starhub, which hold the rights to broadcast the event, may see some gains.
However, Huang Tian Zhao, a research analyst at FSMOne.com, warned that the World Cup only takes place every four years and cannot guarantee regular income. Additionally, the news of Singtel and Starhub acquiring the broadcasting rights came out in October, and most of its impact has already been reflected in their stock prices.
Zhang Bao Luo, a senior strategist at Philip Nova, sees potential in DFI Retail and Thai Beverage. DFI Retail is a leading Southeast Asian retailer, operating companies such as Cold Storage, Ikea, Giant, Guardian and 7-11 convenience stores. Thai Beverage produces and distributes alcoholic and non-alcoholic beverages, including Chang beer.
Analysts remind that the impact of the World Cup is temporary, and investors should focus on longer-term fundamental factors.
Analysts: Inflation and other factors to determine stock market movements
Zhang Bao Luo said that inflation, monetary policy, economic conditions, and geopolitical factors are key drivers of stock market trends and the impact of the World Cup may still be limited to the host country's stock market.
Huang Tian Zhao believes that investors should also pay attention to inflation and economic growth. Inflation is expected to remain high globally for a long time, due to factors such as inadequate oil investments, green inflation, and structural factors such as labor shortage, deglobalization and protectionism, which may push inflation higher. Sustained high inflation may force central banks to continue taking hawkish positions, which may put pressure on stocks.
Huang Jian Ren, a market strategist at Ying Li Securities, points out that three US factors will affect the stock market. First, the risk of a recession in the US economy, as Singapore's economy is mainly based on trade and is easily impacted. Additionally, the decline in profits of US companies may not have bottomed out yet. Finally, the technology war between China and the US will impact Singapore's semiconductor industry.
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