Commentary: Will the FIFA World Cup re-energise sluggish tech stocks?

SINGAPORE: You may have heard of the “World Cup effect”, when the excitement surrounding the event boosts tourism, jobs and investment in the host country.

To traders however, the term refers to the slowdown in market activity during World Cup season. The reason is simply that matches coincide with trading hours.

During the 2010 World Cup, a research paper by economists from the European Central Bank and the central bank of the Netherlands found that stock market trading volumes fell by an average of 55 per cent when a country’s team was involved in a match. Similarly in 2014, trading volumes dropped by as much as 48 per cent.

What has been on the rise is the use of screens and apps as matches play out. Analysts are speculating that this could lead to a much-needed lift for tech stocks.

How will this year’s World Cup in Qatar boost lagging tech stocks? After all, the world’s tech giants are struggling amid weakened consumer demand, decreased advertisement spending and rising inflation. This year, the tech-heavy Nasdaq has dipped by 29 per cent and the information technology sector accounted for 44 per cent of the S&P 500’s decline.

The answer lies in the changing dynamics of how fans interact with the games.

In 2014, 350 million users generated 3 billion conversations, posts, comments and likes related to the World Cup. In 2018, a YouGov survey uncovered that 70 per cent of fans read sports event-related posts on Facebook, while 52 per cent watched clips of the matches on Instagram Stories.

With most viewers being digitally connected, brands are keen to capitalise on the World Cup hype, ushering in a stream of digital marketing opportunities.

Brands in general are 15 per cent more active during the World Cup season,