Ghadir Abu Leil Cooper (pictured), Investment Manager, Baring MENA Fund and Matthias Siller, Investment Manager, Baring Russia Fund, summarise the investment implications of FIFA’s decision to host the 2018 and 2022 World Cups in Russia and Qatar respectively.
FIFA’s decision to award the staging of the 2018 World Cup to Russia means that football won’t be coming home to England until at least 2030. While further years of hurt lie ahead for English football, we have some consolation in the fact that the outcome of the voting strengthens the investment case for not only Russia but also Qatar, which is set to host the competition in 2022.
With strong economic growth and rising demand for goods and services, we have been optimistic over the investment outlook in Russia for some time. While a lack of transparency has discouraged some investors from participating in the Russian growth story, we hold the view that last week’s decision presents an opportunity for the corporate and political spheres to raise standards and challenge long-standing business practices.
Elsewhere, we also believe that infrastructure development will act as a boost to the Russian market with cyclical stocks particularly benefiting. Over the coming years, at least ten stadiums will have to be built across the country while huge investment will also pour into the tourism and transport sectors. The Russian authorities are wholly committed with the federal budget allocating around US$10bn towards the tournament. Moreover, Prime Minister Vladimir Putin has said that he expects the private sector to contribute funding. Russia now has eight years to come up with a sustainable plan for development, if they get it right, the World Cup could prove to be a positive turn for the economy.
The outlook for infrastructure investment in Qatar is equally compelling. Given the scale and scope of development across the Middle East, we have long favoured industrials companies with direct exposure to the ongoing infrastructure build-out. Steel producer, Industries Qatar, is a case in point in this regard. Our conviction in the long-term growth of the sector has been strengthened by last week’s announcement and we are encouraged by the Qatari government’s deep commitment to develop and create world class stadiums and transport links.
By favouring Russia and Qatar over the likes of England and Australia, FIFA is seemingly in agreement with the investment community in recognising the superior growth prospects of emerging market territories. We believe that FIFA’s decision strengthens an already strong investment case and through our portfolio holdings in the Baring Russia Fund and the Baring MENA Fund, we feel well placed to capture these growth opportunities going forward.
