Jun 09, 2014

    Trading set to cool amid football fever

    ONE thing is for sure - the World Cup, which kicks off on Thursday, is bad news for the stock market.

    Data furnished by the Singapore Exchange shows that, even before the curtains lift on the World Cup, trading here has slowed down considerably.

    Total turnover last month was down 38 per cent - to $23.4 billion - from a year ago. Compared with April, last month's turnover was down 9 per cent.

    Dealers are expecting trading this month to slow down even further as the world's attention switches to Brazil, with football fans spending lots of sleepless nights catching the matches that start at midnight and end in the morning.

    They are also anticipating that punters will shift their attention away from the stock market to betting on their favourite teams.

    Observations from the previous World Cup season in South Africa four years ago support the dealers' concerns. On the day after the first match kicked off, stock turnover fell to a two-year low.

    The saving grace then was that the beautiful game also provided four weeks of welcome relief from the fear that had seized global financial markets because of the inability of heavily indebted European countries, such as Greece, to service their loans.

    The world was also captivated by news of an oracle octopus, Paul, which had the uncanny ability to hit the bull's eye in all eight of its World Cup predictions, beating the predictions made by the well-paid analysts of global investment banks such as JPMorgan, Goldman Sachs and UBS.

    There was also a happy ending to World Cup 2010 for the market: Trading activity gradually picked up as the matches progressed, and traders overcame their fear that the financial turmoil in Europe would drag the rest of the world into a fresh global economic crisis.

    Today, there is no similar crisis afflicting global stock markets.

    On Friday, Wall Street set record highs after United States non-farm payrolls gained 217,000 workers last month, confirming that the world's No. 1 economy is firmly back on a growth trajectory.

    In Europe, investors' sentiment was boosted by the European Central Bank's decision to use a string of radical measures to boost growth, including cutting a key interest rate below zero and a 400 billion euro (S$683 billion) package of cheap loans for banks aimed at spurring lending.

    The latest fund-flow-insight report from Citi Investment Research showed a healthy inflow of US$4.3 billion (S$5.4 billion) into bond funds last week.

    There was also an inflow of about US$1 billion each into funds investing in US and European equities. In Asia, foreign funds poured about US$1.2 billion into equity funds.

    All these feel-good factors mean that football-crazed traders can sit back, relax and watch the matches without having to look over their shoulder for the next bout of market turbulence.

    What can be expected is that on days after hot favourites such as Brazil have played the previous night, there will be a lot of sleepyheads in the morning, and this may cause the number of trades to drop.

    Of course, there are still economic numbers this week to watch out for, like China's inflation data. But, compared with the excitement over the World Cup, few traders are likely to bother.