World Cup begins, host country scores!
“Some people believe football is a matter of life and death. I’m very disappointed with that attitude. I can assure you it is much, much more important than that.” Bill Shankly – Former English Soccer Manager
The 2018 FIFA World Cup kicks off on Thursday, June 14 with a match between the host country Russia and Saudi Arabia. Neither country are favorites to win the Cup, but for Russia, hosting the event has an interesting effect!
Host country impact
Mega events like the World Cup are expected to be a net positive for the host country’s economy, which is likely to benefit from a boost in tourism, employment, consumption, and infrastructure measures, among other things. According to a study from the tournament’s organizing committee, the soccer World Cup could boost Russia’s gross domestic product (GDP) by 150 billion to 210 billion rubles ($2.43 billion-$3.40 billion USD) per year over the next five years. The study said that the World Cup added 867 billion rubles to Russia’s GDP between 2013 and 2018.1 Another study from the Boston Consulting Group (BCG) highlighted that a tri-nation North American bid to host the 2026 soccer World Cup could create over $5 billion in short-term economic activity in the region, including supporting approximately 40,000 jobs and more than $1 billion in incremental worker earnings.2
The better growth prospects and a positive sentiment around the host nation generally helps boost the local equity markets. For the most recent seven World Cups, for which we had the data available, on average, the equity markets of the host country returned 21% in the year prior to the start of the event, and outperformed the MSCI World Index by 13%.
World Cup host country’s equity market one-year performance prior to the start of the event
|S. No.||Host Nation||Host Country Stock Index||Event Start Date||Host Country Index One-Year Performance||MCSI World One-Year Performance||Host Country Index Outperformance|
|1||Russia||MOEX Russia Index||6/14/18||29.8%||13.8%||16.0%|
|2||Brazil||BRAZIL IBOVESPA INDEX||6/12/14||12.0%||21.5%||-9.4%|
|3||South Africa||FTSE/JSE AFRICA TOP40 IX||6/11/10||17.2%||11.2%||6.0%|
|5||South Korea/Japan||KOSPI INDEX||5/31/02||32.9%||-12.2%||45.1%|
|South Korea/Japan||NIKKEI 225||5/31/02||-10.6%||-12.2%||1.6%|
|6||France||CAC 40 INDEX||6/10/98||61.9%||18.4%||43.5%|
|7||United States||S&P 500 INDEX||6/17/94||5.1%||9.5%||-4.5%|
Source: NYLIM, Bloomberg, as of 6/13/18. Past performance is no guarantee of future results. It is not possible to invest directly into an index. Definitions can be found at the end of this post.
So far, we have seen impressive performance from the equities in the 2018 host country Russia, with the MOEX Russia Index up almost 30% in the last one year in local currency.
MOEX Russian Index
Source: Bloomberg, as of 6/13/18. Past performance is no guarantee of future results. It is not possible to invest in an index. Definitions can be found at the end of this post.
More to come
Stock markets react differently to the announcement of the tournament, but a sporting event of this scale is bound to have some impact on world economies and the financial markets. Stay tuned for more insights and commentary on the World Cup as the excitement unfolds.
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