Tags: gil | shidlo | Hosting | Olympics | london | investors

Hosting Olympics Can be a Winning Proposition

Tuesday, 14 Jun 2011 07:58 AM

The preparation for London as the venue for the next Olympic Games is occurring during the worst economic recession in decades.

Although the Olympics are a strain on stretched government and corporate budgets, they will have an overall positive effect on the British economy.

Before the Olympics begin, subway networks must be extended, Wi-Fi coverage needs to be expanded, more hotels need to be constructed, existing ones renovated, and Victorian water systems must be upgraded. The British government predicted that more than 100,000 permanent jobs will be created by the Games.

How can investors participate in the run-up to the Olympic Games?

An academic study showed that in the period immediately after the announcement of Athens as a venue for the Olympics Games, the stock exchange of the selected country reacted positively. More specifically, infrastructure-related stocks had a positive reaction.

In the long term, a different study by Professor Nuno Fernandes, of IMD Business School Lausanne, showed that the Athens 2004 Olympic Games left a big bill for the Greek taxpayers as there were severe costs overruns.

On the other hand, he points out that the 1992 Barcelona Olympics were a huge success with the city becoming a major tourist destination and transforming rundown neighborhoods near the waterfront.

In England, there are plans for the regeneration of Stratford in east London, which will be the site of the Olympic Park as well as the neighboring Lower Lea Valley.

Financing of the London Olympics infrastructure is a combination of funds from the central government, lottery proceeds and local government. The running and staging of the Games will be financed by the private sector, with a combination of sponsoring merchandise and ticketing as well as broadcasting rights.

Although it is already a few years since the announcement of London as the choice for the next Olympic Games, the economy in general should benefit substantially from the influx of millions of tourists in 2012. The London Olympics will contribute tens of billions of dollars to the struggling British economy.

The IMF last week reviewed the British government’s economic policies and cut its growth forecast for 2011. Inflation is higher than forecast but the IMF recommended that the United Kingdom shouldn’t re-adjust its macro-economic strategy of rapidly reducing the deficit and its monetary policy.

The IMF stated that weak growth and high inflation are only temporary deviations and support the government’s austerity efforts.

It is obvious that a recovery in England isn’t only a result of the government’s economic policies but also of the recovery of the eurozone, and especially the EU bailout success.

Although, it is difficult to forecast what will happen with the British economy in 2012, the London Olympics will give a much needed boost to the economy.

One way for investors to profit from the London 2012 Olympics is to look at the major sponsors as well as the official suppliers and providers of the games.

There are more than 30 partners and many of them are well-known global companies like UPS, Coca-Cola and McDonald’s.

Companies that are directly involved in the infrastructure and supply chain of the London 2012 Olympics should all benefit. Such companies include Adidas, BT (British Telecom) EDF (Electricity de France – which has a big operation in England), British Airways, Cisco, G4S (the company in charge of security but unfortunately not listed in the United States), Holiday Inn (part of Intercontinental Hotels Group) and Ticketmaster (which merged with LiveNation in 2010).

Some of these companies are listed in the United States, either as regular stocks or American Depositary Receipts (ADRs) while others are part of the FTSE 100 (the top 100 British listed companies).

The iShares MSCI United Kingdom Index Fund (EWU), an exchange-traded fund (ETF) of British stocks, includes some of these companies as well.

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GilShidlo
The preparation for London as the venue for the next Olympic Games is occurring during the worst economic recession in decades. Although the Olympics are a strain on stretched government and corporate budgets, they will have an overall positive effect on the British...
gil,shidlo,Hosting,Olympics,london,investors
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2011-58-14
Tuesday, 14 Jun 2011 07:58 AM
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