No Olympic rally seen for South Korean stocks

Wednesday’s announcement from the International Olympic Committee that the 2018 Winter Games would be held in Pyeongchang, South Korea, is being heralded as a boost to the nation—at least in the Korean media. In terms of investment potential, however, the games will barely register.

While large international gatherings can spur infrastructure investment in underdeveloped locales, as it did in China, South Korea is already quite advanced.

“The event is seven years away and the value of the construction contracts will be insignificant compared to the size of Korea’s GDP,” says Eng Hock, managing director, AGF Asset Management Asia Ltd. and manager of AGF Asian Growth Class. The fund already has more than 18% of its assets in the country (as at May 31, 2011 ).

“It may be beneficial to the Korean construction companies when the related construction contracts are announced but that is at least two to three years away and it is unlikely that the government will build significant infrastructure exclusively for this event,” he says.

He points out that the Winter Games is a relatively small event, compared to the Summer Games hosted in Seoul in 1988, and the FIFA World Cup, co-hosted with Japan in 2002.

“Winter Olympics has a smaller following compared to those two events,” he says. “The benefit in terms of in-bound tourism for Korea will be quite incremental.”

Still, the Winter Games bid may have helped boost some tourism-related stocks in South Korean—in the run-up to the announcement, casino and ski resort operator Kangwon Land, enjoyed what Hock calls “a good rally”, thank, no doubt in part to its assets in Kangwon province where Pyeongchang is situated.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.