Will the Olympics boost shares?

Will the Olympics boost shares?
26 July 2012

LONDON 2012 kicks off tomorrow, with millions of spectators around the globe poised to watch performance on the track, but what about performance of another kind – that of the stock market?

A survey for fund manager F&C found that 40% of people believe the Olympics will have no impact on UK equities whatsoever. In fact, almost a fifth of those survived think it has created a false sense of optimism amongst investors – and that British shares will suffer a significant hangover once the Games are over.

Nearly a quarter of respondents believe the potential positive impact of the Olympics has already been priced into the UK equity market, whilst almost a fifth say they will lead to a temporary surge before shares level out by the end of the year.

With such difference of opinion, cashy decided to ask three investment experts what London 2012 has in store for stock market investors...

Bestinvest

Adrian Lowcock, a senior adviser at Bestinvest, the independent broker, believes there are bigger issues driving stock markets right now.

“It is so difficult to measure the impact of the Games on the stock market, but it is probably minimal as there are bigger issues that are driving the markets,” he told cashy.

“Will Greece collapse and will Spain and/or Italy follow? Will there be a Euro collapse? What about economic weakness and the outlook for the US and China?”

He says that while the Olympics might not have a significant impact on the stock market, they seem to have had a positive effect on London's economic growth and employment.

“That should be good for the economy, if only to reduce the weak growth cycle. Perhaps the recession will prove not as bad as anticipated.”

British Assets Trust

Phil Doel, manager of the British Assets Trust, believes any boost to shares due to the Olympics are already reflected in share prices.

“As investors, we have been looking at the companies that could benefit from events such as the Olympics over recent years,” he says. “Some companies will have profited in the infrastructure construction and other preparations, but as investors there is little upside to be seen looking forward as a direct result of these events.

“Although events such as these will have an effect on sales in the short-term, any positive impact on long-term equity prices is now reflected.”

Killik

Dan Dowding, senior executive officer of Killik’s Dubai business, agrees with Doel that, since markets are forward-looking, one would expect the benefits of the Olympics to be priced into local equity markets at the time of the announcement.

But he adds: “The summer Olympics will not boost the stock market as a whole, but certain companies and sectors involved in and impacted by the Games will benefit – media and telecommunications companies, retail, pub and hotel companies will benefit, just as the construction and infrastructure sector has already benefited in the lead-up to the Games.”

Psssst! cashy asked Killik to reveal its tips on which shares should benefit from the Olympics... find out the independent broker’s recommendations here.

What sort of impact do you think the Olympics will have on the stock market? Share your views with cashy...

Comments

  • Colin
    Colin
    2012-10-04T16:50:34

    So the Olympics certainly boosted shares in Halfords up 36.8 to 302.8 - sales up 14.7% for the quarter as a result of... bike sales - how cool is that:-) and the Tour de France probably helped a bit too..

    Barclays Investment house says: "Our long term thesis remains that Halfords is not a structurally broken business but that it faces some cyclical challenges even in product categories that have long been considered counter cyclical like Car Maintenance. A few months ago further unexpected investments in the company’s cost base followed by adverse weather drove investor sentiment to an unjustifiably low level in our view. More recently the stock has recovered but continues to trade cheaply at 8.9x CY12 PE, more than a 20% discount to the sector. In our view Halfords is a business with a unique position in the UK consumer space but there are further actions necessary, like store investment and service improvement. We believe the negative earnings momentum trend has reversed.

    BUT just a good quarter with the benefit of the Olympics and the Gold medals of Team GB in Cycling doesn’t necessarily create a positive trend going forward and the rest of the year will be equally important for the share price. In our view though better than expected 2Q results and the appointment of the new CEO offer more hope about the progress of the company and should lift sentiment for the time being.

    We reiterate our OW recommendation and price target of 315p."

    (Note - cashy is not advocating buying this stock just highlighting information in the public domain).

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