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Major sporting events – including the Olympics, Ashes and World Cups – can coincide with movement across indices, currencies, stocks and more.
So what trading opportunities were there in the 2016 Summer Olympics and European championships, or the 2015 Rugby World Cup?
Arriving just two years after Brazil hosted the 2014 FIFA World Cup, Rio 2016 found the country in a vastly different mood. After months of economic and political turmoil, serious questions were asked about the city’s ability – and appetite – to host another major tournament.
But a largely successful games, and the new government that followed swiftly after, meant Rio still held plenty of opportunity for traders.
A newly expanded format for the European championships saw a new team take the trophy, after Portugal beat host country France in the final. Most of the potential trading opportunities from the tournament were overshadowed by Britain’s vote to leave the EU a fortnight into proceedings, but some companies were able to benefit from the huge audiences watching on TV.
The UK’s last major sporting tournament came in the form of the 2015 Rugby World Cup, hosted by England – whose early exit dashed any hopes of a return to the glory days of 2003. Find out what our analysts had to say about a potential early exit.
And before the tournament, we took a look at how the Rugby World Cup might have impacted markets in the UK and beyond:
What markets might be influenced by the Rugby World Cup (RWC) 2015?
The UK is the world’s fifth largest economy globally when you look at gross domestic product (GDP) in nominal terms, so the impact of the Rugby World Cup (RWC) will be less pronounced than in many other smaller economies. Still, the economic benefits to the UK are real and according to Ernst and Young’s estimates, some 466,000 international visitors will make their way to the UK to watch the games.
In fact, the total number of spectators should easily eclipse any prior rugby tournament and should be just shy of the 2002 FIFA World Cup in Japan. In total the Rugby World Cup is expected to deliver up to £2.2 billion in output to the UK economy.
Given the level of attendance and spectators and impact on future growth the natural beneficiaries will be UK and some European listed shares. With discretionary spend likely to add to a pick-up in retail sales, I continue to like sterling exposure relative to currencies dependent on commodities.
The benefits of hosting the RWC for the UK economy are not focussed on a single area, but instead spread around – and that makes judging market impact difficult.
The demographics for those nations taking part in the event and the natural volume of visitors from those countries make it difficult to accurately judge the number of increased visitors. How many of the anticipated 466,000 coming for the RWC – including Aussies, Kiwis & South Africans – would have been coming anyway?
The largest demographic of supporters from another currency will probably be coming from Europe as Ireland, Italy & France all use the euro. It is hard to believe that this increase in tourism will outweigh the fundamentals of what is going on in the Eurozone, though.
Which companies will you be keeping an eye on during the Rugby World Cup?
The success of England and the ability of the major nations such as New Zealand, South Africa, Australia to navigate their way to the later stages of the tournament will dictate how much upside will be available to broadcasters.
ITV could benefit from increased market share of TV viewers and therefore future advertising revenue if it were to end up being a closely fought competition and England were to win. The viewing and advertising from this competition has already been factored in to the company’s share price as this has been an event the markets have been aware of for some time. The real benefits for ITV would come from the terms written into the existing contracts should England progress. If ITV were perceived to have done a good job covering the event and the host nation could even win it then they would have a far stronger hand in any future advertising negotiations for future events.
Yes, ITV is the obvious place to look: although the market is already factoring in strong 15% EPS and 12% revenue growth in 2015.
With an estimated 466,000 international visitors expected to descend on the UK, one would expect airlines and hotels to get an extra revenue boost and of course when there’s rugby involved you always expect increased demand for beer. Heineken are expected to record 12% EPS growth in 2015 and 11% in 2014 and are a major sponsor, so any commentary from management about the impact of the RWC on the top line will be of interest.
In this vein, the impact of the RWC on SABMiller and InBev will be keenly watched. There may well also be a boost to the listed betting houses such as Betfair and William Hill.
Which of the sponsors will you be following during the Rugby World Cup (RWC)?
Of the major sponsors for the Rugby World Cup, Heineken are probably the only one that will see an upturn in revenue along with Emirates airlines which might pick up a slightly larger slice of the travelling fans from New Zealand, Australia and South Africa. The others Mastercard, Societe Generale, Land Rover and DHL are more likely to benefit from the improved branding of their business rather than any real upturn in revenue.
Should England progress to the final this will give ample opportunity for Heineken to improve its sales as they will have an exclusivity agreement with the sporting venues. There will also be an ability to improve its brand awareness within the rugby playing demographic: a community renowned for its drinking prowess.
From a pure markets perspective MasterCard, Heineken and Societe Generale will be closely watched.
Societe Generale have the right demographic for the World Cup and should benefit from increased brand awareness. The French bank looks like a solid investment anyway in my opinion, especially when it pullbacks into the €40 area.
With 14% EPS and 3.6% sales growth expected into 2016, and with compelling 5% yield I like the idea of buying pullbacks in a business that is trading on a multiple in-line with its long term average. The European Central Bank is providing huge levels of liquidity through French banking channels, so despite improving economics in Europe I feel Societe Generale will continue to easily outperform the broader market.
And what about previous events – have they coincided with market movements? Take a look at what happened after other major sporting moments.
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This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
1 By number of primary relationships with FX traders (Investment Trends UK Leveraged Trading Report released July 2024).
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