Sporting moments and the 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.

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.

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:

• Toshiba
• Coca Cola
• Heineken
• Land Rover (under the umbrella of Jaguar Land Rover, who are in turn owned by TATA motors)
• Societe Generale
• DHL (Deutsche Post)

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.