World Cup to Investment World

Group #3:Solomon Tsao, Jessleen Dhaliwal,

Tamir Gantunur, Ling Yee Wong, Jefferson Ye, Richard Liu

Overview● What the World Cup is● Effects of World Cup● Impact on Brazil’s Financial Market● Impact on Investors● Future Expectations for World Cup 2018● Investment Strategies

What is FIFA World Cup?● Fédération Internationale de Football Association● Biggest international tournament for football

(soccer)● Every 4 years

FIFA World Cup 2014● Brazil was the hosting country● June 12 – July 13, 2014 (32 days)● 32 teams● Germany won the tournament

defeating Argentina

How does it affect us?Alex Edmans: “The efficient markets hypothesis argues that stock prices depend only on fundamentals. That would be true if traders were robots. But, traders are human beings and they’re affected by emotions.”

Alex Edmans’ Studies● Average losses in “soccer-crazy” countries

had a decline of 0.6% in the market index● 25 out of 37 defeats = market

underperformance

The Effect on Brazil’s Economy● The food and beverage, lodging, car rental,

TV broadcasting and advertising sectors will see the most benefits.

● Flow of tourists will boost regional retail sales and benefit the food and beverage industry.

● 70% of the total investment was directed to infrastructure projects

● Example: Lodging

Graph on Lodging

World Cup’s Effect on Different Sectors in Brazil

Brazil Index (ETF)Jun 13, 2014: the closing price is $49.64

Brazil had a decline of 0.4% in the market index

Jul 8, 2014:the closing price is $47.74

Impact on Financial Market● Brazil Market

o Defeat = lower expectations for Brazil’s marketo Less likely to buy into the market

● US Marketo Defeat = Americans invest cautiously in the short termo Investing in Brazil is an irreversible trend but this negative effect from

World Cup made American invest more carefully in short term.

Impact on Investors● Investing in a foreign company is a way to diversify

o Diversification: a wide variety of investments; will yield higher returns and pose lower risks

● 70% of the total investment was directed to infrastructure projects o expected to inject $90 billion into the country’s economy by 2019o Political instability in Brazil

● Buy shares of US multinationalso Coca-Cola earns bulk of money from foreign countrieso Return from stock changes due to currency values between US and

that foreign country

Future Expectations for 2018 World Cup● Companies like: Adidas, Coca Cola, Budweiser, Hyundai, and Visa will

continue to partner with FIFA in 2015 Womens’ World Cup and 2018 World Cup in Russia

● Russia is set to invest about 20 billion into its new infrastructure for the 2018 World Cup

● Unlike Brazil, the Russian people welcome the World Cup● Russia needed the World Cup to modernize its’ cities infrastructure. (11

cities in Russia will host the 2018 World Cup)● Russian ETFs will be cheap● Any gain will be corrected within a few days

Gainers and losers in Brazil 2014Increased business opportunities for major sponsor/partner companies:● Consumer goods sector (BUD: +25.96%, KO: +3.26%,

NKE: +22.37%)● Service sector (MCD: -1.28%, ARCO: -13.06%)● Financials sector (V: +15.94%)● Construction machinery sector (CAT: +28.63%)

Investment Strategies● More careful on investing in Russia

o US sanctions on Russia over Ukraine causing difficulties in banking sector in Russia

● Active/Passive investment in the US market: o Long-term gains on sponsor companieso Watchlist: PEP, FOX, FB, TWTRo Hold/Short-Selling participant nations’ ETFs

Investment Strategies● Active/Passive investment in foreign

markets:o Frankfurt and Tokyo Stock Exchange, etco Diversification

Conclusion ● Stock market tied to human emotions● Defeat may lead to negative impact in short-

run● Long-term

o infrastructureso political instability

Question?

Referenceshttp://wire.kapitall.com/investment-idea/4-ways-to-play-the-world-cup-stocks/http://www.investopedia.com/articles/stocks/04/121404.asphttp://finance.yahoo.comwww.fifa.comwww.miamiherald.comwww.forbes.comwww.moodys.com