Markets

Punters take a backseat as World Cup fever kicks in

By Li Xiang (China Daily)
Updated: 2010-06-08 10:49

BEIJING - Picking a soccer team now seems a lot more fun than picking a stock on the A-share market as the FIFA World Cup gets ready for its kickoff in South Africa on Friday.

World Cup fever might be enough to divert the attention of the fund managers and stockbrokers from the bourses, which are already depressed by the economic uncertainties. Investors are now worried that the domestic A-share market will hardly prove to be resilient from the World Cup curse.

Researchers have found that global stock markets have a big chance of going down during the month the World Cup is held. Global bourses rose only three times in the past 14 World Cup tournaments.

The same seems to be true China's A-share market. The benchmark Shanghai Composite Index declined about 20 percent during the 1994 World Cup. The market also saw downward corrections during the game in 1998 and 2002. The year 2006 was bullish, but the market still suffered a nearly 9 percent drop when the World Cup matches started.

"The stock market was quiet during the last World Cup and it could be worse this year," said a fund manager surnamed Zhao in Chongqing. "I have cut my stock holdings to just 20 percent in my portfolio and will wait till the matches end."

Though investors are anticipating a weak market with low trading volumes in June, analysts said the correlation between stock market performance and the soccer matches is just an interesting coincidence.

"It is an interesting phenomenon but we simply regard it as a coincidence. One has to look at the economic fundamentals in order to figure out the recent decline in the stock market," said Zhang Qi, an analyst at Haitong Securities.

Related readings:  World Cup to benefit South Africa for years - Zuma  Chinese brewer Tsingtao sees net profit leap in 2009

Although it is questionable whether the short-term soccer fever will materially boost companies' performance, the game is likely to have a positive business effect on industries like beverages, wig makers, media, and sportswear producers.

Tsingtao Brewery Co Ltd shares gained 1.98 percent on Monday bucking the downtrend in the overall market on investors' expectations that beer sales will be significantly boosted by soccer fans around the world.

Henan Rebecca Hair Products Co Ltd, the world's largest wig maker, has also benefited directly from the game as 25 percent of its products are sold to Africa and orders have been increasing steadily in recent months, the company said.