World Cup leaves traders on the bench
IF YOU have been trading the market this World Cup, you might be somewhat lonely.
Trading volumes for the benchmark Straits Times Index (STI) have fallen by a record proportion not seen since 2002, an analysis by The Business Times for the past five World Cups shows.
"Football fever has definitely caught on a little more in Singapore," said Kevin Foy, director of equity sales trading at brokerage Maybank Kim Eng.
Average STI volumes from the beginning of the World Cup on June 12 through Tuesday amounted to just 140 million shares daily - 36 per cent below the 219 million average for the year so far.
The 2010 World Cup held in South Africa saw only a 15 per cent decline. And the 2006 World Cup in Germany saw just a 7.5 per cent fall.
One would have to go all the way back to 2002 to find a worse return during the World Cup period. That year, STI shares traded fell a whopping 45 per cent in volume, compared to the year's average.
But that was no surprise; the 2002 World Cup was held in Japan and South Korea - countries with time zones similar to Singapore's.
And, while match timings this year are in the wee hours, that has not deterred fans from catching the games.
A lot of people are taking vacations in this summertime period and travelling to London or the United States, where the timings for the games are better, said Mr Foy, noting that his office was about 30 per cent emptier than usual.
So, should traders sell in May and go away to watch the World Cup in June?
This may prove to be a wise choice, if you examine returns during the 2002 World Cup and this year's edition.
The 2002 World Cup period coincided with a precipitous market downturn.
Global stocks, represented by the MSCI World Index, fell 6 per cent during the period. As global stocks fell 20 per cent the entire year - or roughly 2 per cent a month - the 2002 World Cup period was a bad time to stay long on the market.
Similarly, this year, the STI is down about 1 per cent so far in this World Cup, compared to a 4 per cent gain year-to-date.
But STI traders who took a break during the World Cups of 2006 and 2010 missed out.
Despite a 15 per cent fall in daily average volume in 2010 during the tournament, STI stocks gained 4.3 per cent during that period, compared to 13.3 per cent for the entire year.
In short, traders could have made a third of the year's return in just one month in 2010.
In 2006, stocks also did better on average during the World Cup month, though less significantly so. They returned 4.6 per cent during the tournament, compared to 30 per cent for the year. Traders who went back to work were rewarded.
However, the World Cup is not likely to play much of a difference on a mid- to long-term basis as performance still depends on the stocks, said DMG & Partners head of research Terence Wong.
OCBC head of investment research Carmen Lee also noted that the June period usually sees a decline in trading activity, even without the World Cup, as it coincides with the mid-year school holidays.
THE BUSINESS TIMES