The Sochi 2014 Winter Olympics will begin on Saturday. The event, which is said to be the most expensive Olympics ever, has cost Russia US$51 billion, surpassing the splendid Beijing 2008 Summer Olympics that took up US$40 billion. Hong Kong Economic Journal’s investor diary column takes a look at the background and asks whether Olympic Games have anything to do with stock market performances.
Sochi was picked partly because of its relatively mild subtropical climate as it is situated on the Black Sea coast near the border with Georgia. Russian leader Vladimir Putin may have also chosen the location to showcase to the world his tough hand in dealing with terrorists.
The total cost of US$51 billion has far outstripped the original budget of US$12 billion that was envisaged in 2007 when Sochi won the right to host the Olympics. Many Russians attribute the overspending to corruption as government officials outsourced construction projects to unqualified parties in return for bribes.
Some anti-graft activists have posted on their blogs a list of major contractors that were seen as having illegitimately benefited from the Olympic Games. Three-fourth of Russians polled in a survey said the Games have exposed the country’s crony capitalism, shaming its people.
As for investors, it is worth noticing that the Games typically herald extreme volatility on the stock markets.
According to investment research institute Bespoke, in seven out of the 10 sample years since the Lillehammer 1994 Winter Olympics in Norway, the S&P 500 Index posted a double-digit movement a year after the Games, with an average 21.45 percent gain for the positive years and 27.54 percent loss for the years with declines.
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