Earlier this week, the 29th Olympics at Beijing were successfully concluded. China showed the world how it was emerging as a sporting power. But, perhaps, stockbrokers could also be keeping a close eye on the Olympics.
Of all things stock brokers perhaps keep an eye on, Olympics could perhaps be the last, you would argue. Maybe, some would watch it out of interest or curiosity of watching the greatest sporting spectacle on earth.
But what if it is found that hosting an Olympic event fuels a rally in the market? It does appear that has been happening. A study of global market for the last 25 years indicates that every time a country has hosted the Olympics, its stock markets have outperformed the global markets too! On most occasions, markets in the home country have jumped 25 per cent or more.
In the 52 weeks after Athens had hosted the Olympics in 2004, the Greek market was up 45 per cent. During the same period, the global markets had run up 25 per cent, clearly indicating that Greek markets had done better than other global markets.
It was a similar story in 1996, when Atlanta hosted the Olympics. And the year after the launch turned out to be very good for the US market, which jumped 25 per cent, doing better than the global markets that clocked growth which was 12 per cent lesser than US.
When we carefully study the markets in Spain for the year after Barcelona Olympics in 1992, a similar trend seems to emerge. While the global markets grew at an average of 13 per cent for the year, Spain’s market danced ahead with a 23 per cent jump. Quite a samba for investors' returns!
South Korea hosted the 1988 Olympics, and it was the first time an Asian nation, barring Tokyo in 1964, was doing so. The markets seemed to follow the trend again and gave a 45 per cent return to its investors. That was way above the 24 per cent average jump seen in markets across the world.
In 1984, after the LA Olympics, the US markets soared 27 per cent, which was evenly matched by other global markets. This is the only exception when the local stock markets did not outperform the global market. Still, the market jumped over 25 per cent.
There is another interesting observation if the trend after Sydney Olympics in 2000 is analysed. The Australian markets remained flat in the 52 weeks after the Olympics. But the global markets had crashed after technology and dotcom stocks had crashed and, as it turns out, the Australian market outperformed its global peers by 31 per cent.
Indian markets have been on fire for the last four years, except for 2008. But India has still not hosted the Olympics ever and is preparing to make a bid for the 2020 games. Interestingly, the Chinese markets, in the year when Beijing hosted the Olympics, are down nearly 50per cent from the peak during this year.
So, is it time to buy into the Chinese markets? Well, if you believe history does repeat itself, it is time you called your stock broker! The RBI does allow you to invest your money in the overseas markets.