Hazy air fails to cloud investors' crystal ball

SINGAPORE - Share investors have enough to worry about on a good day but the haze crisis is making their lives more complicated in more ways than one.

There are the obvious effects, of course, that have to be factored in. As in any calamity, there are winners and losers: Retailers are hit as tourists and shoppers avoid going out while health-care firms could benefit. Who would not want a stake in a face-mask supplier this week?

But the haze we are all enduring also has a profound effect on investor behaviour.

Air pollution, noted a study published in the Journal of Economic Psychology in 2011, depresses moods, which in turn affects decision-making, such as stock investments.

The study crunched the daily returns of five stock-market indices in the United States, including the S&P 500, the Dow Jones Industrial Average and the Nasdaq Composite Index, against the air-quality indices.

The findings in a nutshell - stock markets loathe noxious air.

If you take the steady rise of the Pollutant Standards Index alongside the fall in the stock market's benchmark Straits Times Index (STI) this week, it would be easy to jump to the same conclusion about the local bourse.

The STI shed 37 points or 1.2 per cent over a volatile trading week to close at 3,124.45 on Friday.

But truth is, the share pummelling had less to do with dirty air and more to do with traders' rattled nerves over the imminent end of the United States Federal Reserve's easy monetary policy and the weak economic data out of China.

Even so, if the haze lasts longer, it may fuel negative sentiment about some sectors - travel, hotel, leisure and restaurants.

These largely tourism-related industries are typically the biggest losers when the haze descends on Singapore. As air pollutants reach dangerous levels, tourists are likely to stay away or cut short their stays.

OCBC Investment Research said it expects hotels will see reduced bookings through the third quarter given that the haze could last several weeks.

That, plus the mild oversupply of hotel rooms that is building up, has prompted OCBC to put a neutral call on the sector.

Its top pick, Global Premium Hotels, rose 0.5 cents or 2 per cent yesterday to 25.5 cents, but was unchanged over the week.

Genting Singapore, a leisure stock, fell 5.5 cents or nearly 4 per cent this week to $1.36.

Transport stocks SMRT Corp, ComfortDelGro and Singapore Airlines may feel the pinch if tourist numbers drop.

"After 11pm, the streets are quiet... There are no passengers. So, I just go back home," said a frustrated taxi driver on Friday.

The clear winners are firms in the health-care business. To drum home the point, the FTSE ST Health Care Index outperformed the STI, gaining 0.7 per cent yesterday. Medical supplies-maker Medtecs International shot up over 50 per cent or 3.1 cents over the week to 9.1 cents. The firm makes the kind of items, including masks and respiratory treatment equipment, that have been in heavy demand.

Raffles Medical Group (RMG) also fared well, advancing 11 cents or 3.7 cents over the week to end at $3.06.

CIMB Singapore pointed out in a report that patient numbers at all RMG's 72 clinics have shot up on the back of the haze.

Traders' moods may be dampened by the haze and other negatives but, going by the performance of sector-specific stocks over the week, the toxic air has yet to cloud their stock-picking skills.

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