A Dream Comes True: Beijing 2008 Olympic Games
Source from Asia Financial Securities
Summary
Beijing's winning bid to host the 2008 Olympic Games will bring tremendous economic benefits to the city, not only in 2008, but also during the years before and after then events. The biggest winners will include business involved in sports, tourism, construction and telecommunication.
Beijing municipal government promised to invest a total of RMB 180bn (US$22bn) in the construction of urban infrastructure facilities after the city won the right to host the Games.
Table 1
Beijing Ambitious Blueprint
Major Investments
Expressway construction will increase to 600 km (from existing 200km)
Environmental protection
Protection of cultural and historical sites
Other investments
Other investment will involve the capital's information system and housing
Construction of 19 planned sports facilities and other relevant infrastructure
In the next 5 years, Beijing will finish renovating more than 9mn sq. m. of old houses
Source: Asia Financial Securities
Stimulus to Foreign Direct Investment (FDI). Preparations for the Olympics will attract more foreign investment and Sino-foreign economic co-operation projects. Multinational companies will take the opportunity to win supply contracts for infrastructure projects. The mayor of Beijing has promised equal opportunities to foreign businesses in bidding against Chinese firms.
Boost to tourism and service sectors in China. The tourism industry will experience an upsurge due to increased tourist arrivals before and during the Olympic Games.
Short term economic impacts
Direct impacts - Refers to the actual spending by the Committee for the Games, for example, the purchase of equipment for international broadcasting.
Indirect economic impacts - Refers to the portion of spending from the significant number of visitors before and after the Games, including those associated with the media, cultural events, marketing, Olympic family, international press companies, etc. Spending by visitors is projected at US$1.3-1.5bn.
Induced economic impacts - Refers to the multiplier effects of the direct and indirect impacts, created by re-spending the amounts involved in the direct and indirect impacts.
Long term economic impacts
The Olympics will leave a legacy of world-class facilities and spur renovation and expansion of existing facilities.
Beijing's reputation as a world-class location for sporting events, conventions and leisure travel will be enhanced.
The Olympics may spur much additional trade and investment opportunity.
The Olympics will provide community benefits including local volunteerism, job creation and training, youth education and cultural programs.
Industries to Benefit Most
Statistics from the 1996 Atlanta Olympic Games indicated that business services (16.8% of total, US$321.6mn), amusements (11.4%, US$218mn), wholesale and retail trade (8.2%, US$156.4mn), eating and drinking (6.7%, US$129mn), and transportation (4.6%, US$88.7mn) benefited most from Olympic-related spending.
Impact of the Olympics on stock prices is expected to be more one-off than permanent. Based on Sydney's experience of hosting the 2000 Olympic Games, there was no overall impact on the stock market; significant impact was only found in specific industries such as building materials developers, and significant positive reaction was confined to stocks based in the region.
Although the impact of hosting the Olympics on stock prices is usually short-term, the long-term benefits of the Games should not be ignored. We suggest stocks with specific Beijing focus and of local value.
Table 2
Olympics Stocks
Sectors to benefit / Companies
Energy
Beijing Datang (991): Total installed generation capacity of 4650 MW. Serves Beijing, Tianjin & Tangshan areas
Infrastructure, Hotel, Tourism
Beijing Enterprise (392): Jianguo Hotel (50.5%), Yanjing Brewery (53.7%), Capital Airport Expressway (96%), Sanyuan Food (95%), which holds Beijing McDonald's (50%)
Construction/Property
Beijing North Star (588): majority of properties located in Beijing -assigned by gov't to be one of leading arrangers for the construction of Olympic facilities
China Resources Beijing Land (1109): majority of properties located in Beijing
New China World Land (917): owns Beijing New World Center, a large property development site in Beijing
Transport
Beijing International Capital Airport (694): own and operate the Beijing Airport aeronautical business
China Airline ((upcoming IPO)
Media
Tom.com Ltd. (8001): FenchMedia, China's 2nd largest Outdoor Advertising operator, covers 19 major cities including Beijing & Shanghai, YC Press Advertising and YC Sports, well recognized as a leading sports marketing organization in PRC
TravelSky Technology (696): all of China's travel agencies subscribe to TravelSky's computer reservation system, CRS, to book tickets. In 1999, the Group's system processed approx. 64mn bookings
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