Rugby World Cup: Investment Picks From The Pools
- The Rugby World Cup starts on 8 September
- How do the participating countries stack up when it comes to their investment credentials – and who would hold the trophy?
- HL senior analyst Hal Cook picks those he thinks are likely to see the best stock market performance over the next 12 months and beyond from each pool
The Rugby World Cup will kick off on 8 September, with 20 nations going toe-to-toe to lift the Webb Ellis Cup. In a topflight rugby tournament, as in market economies, there are highs, there are tough times and it can be very unpredictable. Who will come out on top?
Rugby World Cup - Pool A (New Zealand, France, Italy, Uruguay and Namibia)
“France is the top pick of pool A. Europe more widely has seen some strong stock market performance over the last 12 months with France a key contributor to this. Luxury goods have continued to see strong demand, particularly from China. LVMH is an example, with their share price hitting an all-time high earlier in 2023. As the home nation, a bit of ‘champagne rugby’ could help increase the expected positive economic impact from the World Cup.
While New Zealand are their biggest competitor on the pitch, I see limited challenge coming from their stock markets. Italy is often cited as a country at risk of significant financial strain, but this is yet to occur – the opposite of their rugby, which is often deemed to be on the cusp of notable improvement, but this is also yet to occur.
Pool B (South Africa, Ireland, Scotland, Tonga and Romania)
In a tough group, South Africa is first choice here. An emerging economy with a young demographic, means there is potential for the ‘boks to spring into investment life. Their links to commodity prices can provide some further diversification and this is an interesting option to gain some exposure to higher risk frontier markets on the African continent. With an emerging market like this, there is potentially higher risk, however running for the line rather than taking an easy kick can mean greater rewards.
Ireland is probably their biggest competitor, however the country has experienced a lot of volatility and many of the drivers for their economy are linked to multi-national businesses booking profits in the country due to their tax regime, rather than the country’s domestic output.
Pool C (Wales, Australia, Fiji, Georgia and Portugal)
It’s hard to look past Australia with the largest economy in this group. Again, offering exposure to industries linked to commodity prices, but here there is a bigger link to electric vehicles (EV) and providing the resources that will help fuel the EV boom in the coming years. The large exposure to the mining sector in the economy acts as a diversifier to many developed country stock markets too. They should be able to dig deep and keep pushing forward, phase by phase, alongside the occasional maul.
In investment terms, Portugal is the only realistic challenger. However, an ageing population alongside productivity challenges continue to make stock market gains difficult, with losses over the last 12 months having the potential to continue.
Pool D (England, Japan, Argentina, Samoa and Chile)
The final pool-winning pick is Japan. Similar to France, the Japanese stock market has seen a lot of positive momentum recently, with the Nikkei hitting levels not seen since the late 1980s. The continued reform of their stock market rules, alongside some inflation for the first time in decades, means there are a number of tailwinds for the country.
The amount of cash held by Japanese individuals and companies remains extremely high compared to other regions and so even if a small proportion of this finds its way back onto the investment pitch, it could be a game changer, equivalent to having 2 or 3 players return from the sin bin at the same time. It’s biggest competitor within the pool is likely to be England, but recent fumbles and knock-ons mean investor confidence is lacking for the UK compared to Japan.
Who Is The Overall Winner?
It’s always tough to predict a winner of any World Cup and it’s no different here. Looking at the country’s economies, Japan has the potential to hold the trophy aloft. The positives about potential cash being invested into the stock market could be a large tailwind for them.
The Yen has been weak over recent times and there is potential for it to increase relating to changes in central bank policy. Should this happen, this would act as a further tailwind for investment returns calculated in GBP.”
Article by Hal Cook, senior investment analyst, Hargreaves Lansdown
Source valuewalk
