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Olympics could help markets sprint ahead

Friday, August 10, 2012 - 02:35

Aug. 10 - On records of past Olympics, stock markets of respective host nations have performed exceptionally, and investors are braced to see how Britain's FTSE performs after the dust settles. Jamie McGeever reports.

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Faster, higher, stronger. That's the official motto of the Olympic Games. On the evidence of the last 20 years, it also applies to stock markets of nations that host the games. In the calendar year after each of the last 5 Games, the stock market of the host country has outperformed the world average by at least 2 to 1. In some cases, more than 3 to 1. James Bevan, director at CCLA, explains. (SOUNDBITE) (English) JAMES BEVAN, DIRECTOR, CCLA, SAYING: "I think that the key issue is that not only is their significant investment in the economy, but also sentiment towards the economy, to the markets and to the general outlook is improved when you have a domestic success." Let's start with Barcelona in 1992. The following year, world stocks rose 22%... Spain's IBEX jumped 54%. In 1997, the year after the Atlanta games, world stocks rose 13%, while the S&P 500 gained 31%. 2001, following the Sydney games, was a bad year for markets. The MSCI World Index fell 17%. Yet Australia's All Ordinaries Index rose 6.5%. Greece outperformed world stocks almost 4 to 1 in 2005, after the Athens games. Did China's Shanghai Composite match the 32% global market surge in 2009? You bet it did. And then some - up 80% So, Britain's FTSE has a pretty tough act to follow next year. (SOUNDBITE) (English) JAMES BEVAN, DIRECTOR, CCLA, SAYING: "I find it very difficult to anticipate that London can deliver a multiple of returns of other markets but I do think it is relatively well placed, given that we have a very flexible approach adopted by the Bank of England. We have relatively low evaluations and we have a defensive profile of companies so I expect it's appropriate given the prospects of continued slow growth." But the hurdles are manifold, and high. Britain is in recession and any recovery will be anaemic. The government's severe austerity programme has yet to fully be felt. The country's banking system is large relative to the size of national output - and it's broken. And there's the small matter of the euro zone crisis on its doorstep. Jamie McGeever, for Reuters

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Olympics could help markets sprint ahead

Friday, August 10, 2012 - 02:35