Investors and analysts are trying to predict the games’ effects on China’s booming stock markets.

Some fear shares will drop in value once the event is over.

Others say the experience of past Olympics suggests that equities will continue to rally.

Start with the fact that the Olympics will leave behind an amazing heritage of infrastructure which will, for tourists, make visiting Beijing a delight.

Then consider China’s economy is growing at a fast pace — 11.5% a year according to the latest quarterly statistics although it is possible/probable that will come off the boil a bit.

Garry Evans, chief Asian equity strategist for HSBC in Hong Kong, says economic and stock market performances after an Olympics are driven largely by the event’s success: ‘An impressive, smoothly run Olympics tends to boost the confidence of the host nation’s citizens and the respect of the rest of the world.’ True. And an efficient smoothly run HSBC would not have to spend so much time explaining its plight to its shareholders.

Still he is right in saying that since the 1964 Tokyo games host country stock markets on average rose 21% in the year after the event.

Galaxy Securities in Beijing, however, said its analysis did not find any Olympic effect on host country shares in the five years before and after games held since 1984.

Wang Zhuo, a Galaxy analyst, says there was no apparent influence on the developing trend, ‘except Barcelona, which saw three months of drop before the Olympics. Seen as a whole, the scale of impact of the Olympics on an economy always differs with the scale of the economy. Smaller economies like South Korea or Japan were influenced more by the Olympics. China won’t see such a great impact of Olympics on its general economy but certain industries will be affected a lot.’

Wang Zhuo plainly did not include Australia in her analysis which has seen nothing but boom times since its Olympics and a fair guess will be that the boom will continue for another five to ten years.

And all of the analysts seem to have forgotten that as the Olympics end so the hype for Expo 2010 in Shanghai starts. It will not be bigger than then Olympics. But it may well have more far reaching effects.
Source: Financial Times