The troubled stock markets have been dominating headlines in the UK at the beginning of this Olympic year. So it seems pertinent to pick up on an article on the Financial Times’ own Beijing Olympics page discussing the impact that the Games will have on the Chinese stock market.
The FT finds experts with differing opinions about whether the Olympics will boost the Chinese stock market: HSBC research showed that “since the 1964 Tokyo games host country stock markets on average rose 21 per cent in the year after the event, with particularly strong performances in the first seven months”, while “Galaxy Securities in Beijing, however, said its analysis did not find any Olympic effect on host country shares in the five years before and after games held since 1984”.
However historical research should presumably be treated with a pinch of salt this time around, as the highly publicised Chinese economy is surely an exceptional case.
“One argument in favour of hosting the Olympics is the benefit to the economy from tourists and infrastructure investment.” The Chinese government is spending over £21 billion ($40 billion) on the Games according to the BBC, including almost £1 billion on the Olympic venues. Meanwhile the Olympics stimulated a 9% growth in advertising spend in 2007 in China.
However, the Chinese economy is still growing at 11.5% according to the FT, and is hardly in any need of extra stimulae. With this in mind the words of Garry Evans, chief Asian equity strategist for HSBC, sum up the most important factor on the Chinese economy (if not its society); a smooth Olympics:
“An impressive, smoothly run Olympics tends to boost the confidence of the host nation’s citizens and the respect of the rest of the world.”