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SGX trading activity down since World Cup

Trading activity on the Singapore Exchange (SGX) is likely to remain subdued over the next few weeks as the 2014 World Cup moves on to the knock-out stage.

SINGAPORE: If past World Cup tournaments are anything to go by, trading activity on the Singapore Exchange (SGX) is likely to remain subdued over the next few weeks as the 2014 World Cup moves on to the knock-out stage.

Some analysts say the average monthly value traded is already lower by 25 per cent since the World Cup kicked off in Brazil on June 12.

Jimmy Ho, remisier at UOB Kay Hian, said: "Before the football season, on average the daily value was above S$1 billion per day, now the average daily value is below S$1 billion.

“The casino, the World Cup, the stock market, they all fight for the pie from retail investors, so basically the drop in volume is from the World Cup season. As for the fundamentals, even the slightly better news from the Fed did not see any kind of a direct response.”

Federal Reserve Chair Janet Yellen had said this week that interest rates would remain near zero for a considerable time after the bond buying programme ends.

The Fed also remained confident that the US recovery is largely on track.

According to DMG & Partners Research, the average monthly value traded now is down by some 25 per cent, compared to the previous month.

This is worse than in 2010 when the drop was 14 per cent, but better than 2006, which saw a fall of 32 per cent.

Some analysts expect trading volume and value to dip further in the coming weeks as the World Cup tournament enters the knock-out stages.

The other thing to watch is the ongoing unrest in Iraq, which could have some impact on the markets if the situation worsens.

But while the World Cup is a key factor, analysts say it is not entirely to blame for the slow market activity.

Terence Wong, head of research at DMG & Partners Research, said: “If you have been studying what's been happening over the last 6, 7, 8 months, retail participation has also crimped, has come down significantly and the participation level, I believe has gone down anywhere from 35 per cent to 45 per cent.

“There's a combination of factors but one of the biggest one would be the small cap fiasco which started in October 2013 and it sort of carried over to a good part of this year."

Some market-watchers say that the lower trading volume on the SGX could also be seasonal, as the June school holidays pack investors off on a vacation.

The market is also in need of a catalyst to spur activity.

Liu Jinshu, lead analyst at Voyage Research, said: “I would expect the market to be range-bound for some time until further news jolt the market.

“For example, after the announcement of Alibaba taking a stake in SingPost, as well as previous M&A deals, so each time there is a major transaction, the market gets heated up again."

It appears that investors will be keeping their eyes fixed on their football screens for now, rather than their trading charts. 

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