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Sporting moments and the markets

  • Major sporting events – including the Olympics, Ashes
    and World Cups – can coincide with movement across
    indices, currencies, stocks and more

  • Which markets might be affected by the Rugby World Cup,
    kicking off on September 18?

Rugby World Cup 2015 – market impact

Elite sport and financial trading share many similarities. Both require a cool head, reap benefits from studious preparation, and tread a fine line between success and failure.

We’re going to be taking a look at the share listings of this year’s competition sponsors, as well as the indices and currencies of some of the countries taking part. Could a momentous victory for one of the home nations lead to movements in the markets?

Rugby World Cup sponsors

Sponsoring a sporting event can deliver huge boosts to a brand. But how much does its share price feel the effect?

Last year, Coca-Cola’s sponsorship of the FIFA World Cup coincided with some impressive increases in its share price. Heineken, Societe Generale and DHL (listed under Deutsche Post) will be among the sponsors hoping to benefit from this year’s biggest tournament.

Rugby World Cup currencies & indices

The jubilation of a sought-after cup victory – or disappointment of a missed opportunity – can affect traders as well as players and fans. Ashes victories, for instance, can impact markets in either hemisphere.

England’s last Rugby World Cup victory came in 2003, and coincided with a major rally for the FTSE and the pound. New Zealand, Australia and South Africa will all be hoping that a record third win could have a similar effect – while France, Scotland, Wales and Ireland chase their very first trophy.

Q&A with the analysts

Our AnalystsOur Analysts

Travis Robson is Head of Premium Client Management

Travis has been working in the financial markets for over nine years, with companies including ABN AMBRO, HSBC Investment Bank, Global Trader and PSG Online Securities. He is a regular contributor to media organisations that include Reuters Africa, BDTV, Moneyweb, SABC and CNBC Africa. Travis is also a member of the South African Institute for Financial Markets and an equity derivative member of the Johannesburg Stock Exchange.

Shaun Murison works as a Market Analyst

Shaun has worked in financial markets for over eight years, and previously ran IG’s Durban branch in South Africa, before moving to Johannesburg. As a market analyst he presents our CFD trading seminars around the country. In addition, Shaun is a regular commentator on local financial markets, making contributions to the various forms of media and writing daily and weekly market reports. He is a registered person on the Johannesburg stock exchange and a certified market technician (CFTE).

Leigh Riley is a Premium Client Manager

Leigh has worked in the finance industry for five years. He is a dealer on IG’s trading floor, with a focus on premium client management. Leigh is also a a member of the South African Institute for Financial Markets. His previous roles include being in a financial advisory role at Discovery and Liberty Life, before moving on to Global Trader as a sales manager at their Durban branch.

Have any recent major sporting events impacted markets?

The FIFA World Cup in 2010 was interesting as it was hosted in South Africa. South Africa was put on the map and the Johannesburg Stock Exchange (JSE) was definitely put in the spotlight.

There was a major drive in building and property stocks. A lot of work to build infrastructure took place in South Africa and JSE-listed stocks in that sector saw movement. We also saw a drive higher in alcohol, hotel/gaming and leisure stocks.

On the other hand, negative moves were probably reflective of a market where investors could have been disconcerted by the financial burden of hosting the games. There was also less trading activity during soccer matches: with many investors focused on hosting, entertaining or attending games.

There are documented reports that market activity dropped significantly during 2010 World Cup soccer matches – by 24% during other nations’ matches, and by 45% during South Africa’s matches.

Some of the JSE stocks that affected were: Murray & Roberts, Growthpoint, City lodge Hotels and Redefine.

I have to agree with Travis on the drive in construction stocks, though they have since seen penalties for collusion and price fixing on FIFA World Cup developments.

Infrastructure around Sandton in Johannesburg was immense and since this area is also a financial hub – and the home of the local securities exchange – it has seen the large law firms and financial houses move to the area like ABSA (Barclays Africa) and Discovery Holdings Ltd.

There would have been a definite uptick in listed property and we have seen a boom for the last three years specifically as revenue post development has started to translate in earnings.

Finance companies, along with the likes of SABMiller, were very strong in sponsorship and marketing over that time and no doubt would have indirectly benefited by the amount of airtime they received.

A major sporting event such as a World Cup or the Olympic Games often necessitates infrastructure development to support the occasion.  The 2010 FIFA World Cup in South Africa provides evidence of this, as companies in the construction sector saw their order books fill-up in the years leading to the event.

Construction is a major source of employment and certainly lines the broader consumer’s pocket: as well as adding a few temporary points to domestic GDP. However, there is a hangover induced from the event as most of the employment created is temporary.

The tourism industry (hotel, leisure and transport) is another obvious benefactor with an influx of foreign inflows accompanying global travel as fans look to support their respective teams.

What markets might be influenced by the rugby world cup (RWC) 2015?

The host nation is usually the most likely focus of any trading impact from a major sporting event. For the Rugby World Cup in the UK, £982 million of value is expected to be added to national GDP: on top of the £85 million that has already been invested in infrastructure. Not to mention the 41,000 jobs to be supported around the country.

Further to what Travis has mentioned, Ernst & Young has released a report on the potential impact of the competition. The highlights look at better facilities, job creation, increased schooling, the return of players and new players entering the game through O2 touch, (which should benefit O2) as well as cultural engagement which could mean NPO’s/NGO’s benefiting.

Naturally, tourism and travel should be big beneficiaries along with construction companies. Local market participants involved with hospitality and local travel such as Uber could also see an uptick.

Hotel and leisure groups are the most obvious sectors to benefit in the country hosting a Rugby World Cup.

A surge in visitors could also see short-term strength translated into the pound sterling. Those travelling from far might be tempted to extend holidays into the Eurozone so popular hotel chains will certainly derive a short-term benefit.

Retailers with licenses to sell the relevant Rugby merchandise are also likely to see a short term boost in revenue.

Which companies will you be keeping an eye on during the rugby world cup (RWC)?

South Africa’s biggest brewer, SABMiller, will be one to watch as the tournament progresses – and I’ll be following other related companies in the alcohol business as well.

Any hotel or property stocks that have a link to the UK (Capital & Countries Prop Plc, for instance), or any companies with a link to the UK stock market – maybe in retail, accommodation, merchandise or restaurants. Beyond that, healthcare companies like Life Healthcare or Netcare and gaming/sports betting businesses.

I’ll be mainly paying attention to South African companies that are dual listed on the JSE and the LSE – or have strong ties to the UK – as well.

Companies like private hospital group Mediclinic, Spar, British American Tobacco, Brait (who just acquired a major stake in British high street chain Newlook) and of course SABMiller.

Away from the traditional benefactors from a major sporting tournament – brewers, hoteliers or builders – Uber will be one to watch in terms of deriving benefit from major sporting events like the Rugby World Cup.

Transport is a necessity for those traveling abroad and Uber has become a global leader in the space, eroding the business of meter taxis.

Which of the sponsors will you be following during the rugby world cup (RWC)?

For me it’s the sponsors of the Springboks: their principal shirt sponsor Barclays Africa/ABSA, SABMiller (who make Castle Lager), hoteliers Tsogo Sun, telecom company Vodacom and Spur Corp. All of these businesses will be hoping that their investment is rewarded with a run deep into the tournament.

Yes, Barclays Africa/ABSA, SABMiller, Vodacom, Tsogo Sun all have a stake in the Springboks’ success. Imperial Holdings (who own Europcar) and Asics Corp (who supply South Africa’s kit) could also be ones to watch.

Although for most, the event is more an exercise in brand awareness – which should hopefully translate into revenue down the line – all these companies should benefit from increased exposure in the (likely) event that South Africa take home the Web Ellis trophy.

I’ll be keeping an eye on all of the major RWC sponsors who will be getting major airtime during the tournament:

Who do you want to win the rugby world cup (RWC) and who do you think will win?

South Africa are the team I want to win: but it’s difficult to look past New Zealand.

I wouldn’t be a South African if I wasn’t backing my country to win the world cup. Since being readmitted into the tournament, South Africa has won two of the five possible world cups.

While a run up of games into the world cup might suggest that the All Blacks are perhaps a stronger team, these games serve as preparation for the event and South Africa has certainly shown its strength in rising to the occasion when the real game time arrives.

Like Shaun, I’m sticking with South Africa to win this World Cup. And I’ll be celebrating if they do.

Which markets/companies do you think will benefit most if South Africa win the web Ellis Trophy this year?

If South Africa do manage to claim a record third Webb Ellis Trophy, then plenty of markets could see movement. The FTSE/JSE Top 40, South Africa’s major index, may see some benefit.

Holdsport (a sporting goods chain/ reported a big impact from the Rugby World Cup in 2011, when New Zealand claimed the title on home soil. If South Africa win the trophy, that impact could be replicated. Mr Price Sport (owned by Mr Price Group) may see a similar effect.

Elsewhere, the local TV rights are held by Naspers DStv so they may see some benefit from increased viewership. Discovery usually has TV advertising during the games, so could be one to watch.

SABMiller (a lot of beer will be drunk) and local retailers like Woolworths, Pick n Pay, Shoprite (a lot of barbecues shall be had) and Clicks. Followed by Pharmacare/Pharmaceutical stocks (to deal with the insurmountable hangovers).

A lot of these companies will benefit from a stronger pound as they earn offshore revenue.

Sporting moments, surging markets?

Have previous sporting events coincided with market movements? Take a look at what's happened after other major sporting moments.

Rugby World Cup, 2007

Ryder Cup, 2012

Wimbledon, 2013

Olympic 400M Final, 2000

Rugby World Cup, 2003

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