Phisix and the Manny Pacquiao Post Hoc

The boxing legend Manny Pacquiao 35 will try to regain lost glory with a return bout against Brandon Rios 27 for the vacant WBO welterweight bout at Macau SAR.

The Bloomberg presents an interesting “chart of the day” on how the Phisix reacts to Mr. Pacquiao’s historical fight performances

The CHART OF THE DAY shows the Philippine Stock Exchange Index has risen 73 percent of the time in the first trading day after a Pacquiao win, compared with 52 percent for all days since 2007. The gauge climbed an average 0.5 percent the day after fights, versus an average 0.04 percent increase for the entire period.

“Pacquiao’s victory in the ring creates a nationwide euphoria that things will get better -- positive sentiment, positive investment,” said Jonathan Ravelas, chief market strategist at BDO Unibank. “A victory by Pacquiao will help lift the Philippine spirit at a time when it’s facing the impact of calamities. The nation definitely needs to hear something positive right now.”

In my view this represents a great example of the cognitive bias called clustering illusion—or looking for patterns where there have been none, which also serves as a convenient “post hoc” rationalization for the relationship between Mr. Pacquiao fights and the Phisix.

Some facts...

Mr. Pacquiao unfortunately lost his two last bouts in 2012 (Tim Bradley June 9, 2012 and to Juan Miguel Marquez December 8, 2012—Box Rec) 

And a coincidence is that Mr. Pacquiao’s surprise loss to Marquez in 2012 coincided with the Typhoon Pablo December 2-9 2012, which turned out to be the “most destructive” storm for the Philippines-which Typhoon Yolanda has been widely expected to top.

The final tally from Typhoon Yolanda has yet to be reported. For now agricultural losses (php 10.59 billion) and infrastructure damage (php 1.98 billion) which adds up to php 12.57. The government estimates production losses at Php 8.6 billion. So total losses is at Php 21.7 billion halfway from Typhoon Pablo. (inquirer)

While it may be true a day after Pacquiao’s victories resulted to mostly gains in the Phisix in terms of frequency (73%) and scale (.5%), Mr. Pacquiao’s alleged contribution in “uplifting the Philippine spirit” has not been supported by trends seen from the longer frame. [Note I did not bother to take a look at the Phisix returns post Bradley and Marquez fights]

Proof?

The Phisix roared to its highest level in May 2013 despite the twin losses by Mr. Pacquiao to Mssrs Bradley and Marquez. Again the loss to Marquez has been coincidental with Typhoon Pablo. 

In short, there has hardly been a relationship between Mr. Pacquiao’s performance (or Typhoon Pablo) and the Phisix which media and the experts try to associate and sensationalize by appealing to emotions.

The above also shows how desperate industry participants have become since the losses from June (which have been Non-typhoon or Pacquaio related but about the renascence of the global bond vigilantes) 

The Phisix has posted losses for three consecutive weeks, namely 3.5% week ending November 8, .14% November 15, and this week’s 4.12%, for a total of 7.76%. 

My hunch: unless Monday should turn out with a surprise deterioration from our neighbors, Indonesia and Thailand (which I believe have signified as the key sources for the weakness in the Phisix), the oversold conditions of the Phisix should translate to a temporary bounce, whether Pacquiao wins or losses.

As for Pacquiao’s boxing career, whether he wins or he losses, I believe that he has reached his peak, and is on the way to a decline for the simple reason that Mr. Pacquiao is human and mortal. 

Mr. Pacquiao’s insistence to refrain from retirement is I think not only about money and prestige but about the denial of this reality. The same denial we see in industry participants facing what seems as increasing risks of a full scale bear market for ASEAN. 

As a former boxing aficionado, while I respect Mr. Pacquiao as one of the greatest boxers ever, that respect remains limited to the four corners of the boxing ring.