The beaten-up Chinese market could get a much-needed pop after the Olympics. The median stock-market gain of the countries that hosted the...
The beaten-up Chinese market could get a much-needed pop after the Olympics.
The median stock-market gain of the countries that hosted the past five Summer Olympics was 38 percent in the year after the Games, according to Tim Hayes, chief investment strategist of Ned Davis Research.
“The implication is that following a flurry of activity to build infrastructure and expand services ahead of an Olympiad, Olympic host countries typically take a breather,” he writes. The stock-market benefits from increased trading liquidity and less inflationary pressure, he adds.
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Chinese stocks are down 35 percent in the past year on concerns about slower growth and rising prices. Higher energy and other costs boosted the country’s inflation to a year-over-year rate of 7.1 percent in June.
Consumer-price inflation declined in four of the five countries in the year after the Olympics. This year’s Games begin Friday.
“While many argue that once the Games end in August, so may China’s economic boom, I don’t believe this is likely to happen,” says Robert J. Froehlich, vice chairman of Deutsche Bank’s global-asset-management unit.
“China’s explosive growth is not just about these Olympics. In fact, China’s economy has been growing at 10 percent for the past two decades.”
The start of the Games could also ease global oil prices. China imposed two months of restrictions on traffic and industry beginning at the end of July, to improve air quality and ease congestion in Beijing, notes Hayes. The country is second to the United States in oil consumption, accounting for 8.5 percent of demand.
Froehlich says oil, which recently dipped below $120 a barrel, could end the year near $105 to $110 a barrel.