As the World Cup gets underway in South Africa, excitement is at fever pitch among soccer fans. For the rest of us, there will be nothing to do over the next month but wait to see how the financial sector reacts.
Even before the kickoff, some big names are already in action. Swiss giant UBS scored back in 2006 when it predicted that Italy would win the World Cup. Two years later, it used the same model to predict the winner of the European Championship: Sadly, it just wasn’t the Czech Republic’s year. This time round, UBS is offering only percentage likelihoods of victory. Its top four: Brazil, with a 22% chance of success, Germany on 18%, Italy on 13% and The Netherlands on 8%.
Goldman Sachs is also in cautious mood, and is predicting only the semi-finalists: England, Argentina, Brazil and Spain. But just for fun, it has also carried out a probability exercise based on FIFA rankings and bookmakers’ odds. Under that rubric, its top picks are Brazil, with a probability of success of just under 14%, Spain on just over 10%, and Germany and England neck-and-neck on just under 9½%.
And then there’s J.P. Morgan which has applied quantitative analysis to the problem. It sees Brazil as the strongest team, but believes the fixture schedule will deprive it of the title. Instead, it predicts 3rd place for The Netherlands, 2nd for Spain and … a win for England (huh!).
But will markets respond to what happens on the pitch? Some believe they may, partly because testosterone-fuelled share traders are just the sort of guys who like to stay up all night watching big matches. In soccer-mad Hong Kong, China, for instance, trading is predicted to be light during the football festival, which can make for extra volatility in share prices.
In the United Kingdom, a study by a group of academics suggests shares in London fall when England loses or draws and rise when it wins. “Stockbrokers, like everyone else, can be carried away in the depression associated with an England loss at the World Cup,” Professor Robert Hudson told The Daily Telegraph.
And then there are the business winners and losers. A good run for Portugal or Brazil might boost shares in Nike, which makes the teams’ kits. By contrast, success for Spain could be good news for Adidas. As HSBC’s Erwan Rambourg told Forbes, “The further your team goes in the tournament, the more jerseys, footwear and footballs you will sell.”
The bigger question: Will the World Cup mark the beginning of a new era for Africa on the world stage? If you can tear yourself away from the soccer action, you’ll find regular postings here on the OECD Insights Blog over the next few weeks examining that question and, more broadly, the challenges facing Africa and its prospects for success in the post-World Cup era.
Photo courtesy of Steindy